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And if One Size Fit All after All? A Counterfactual Examination of the ECB Monetary Policy under Duisenberg Presidency

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  • Jérôme Hericourt

    (TEAM - Théories et Applications en Microéconomie et Macroéconomie - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

Abstract

How did European Central Bank (ECB) fit the disparate macroeconomic needs of euro area members? The purpose of this paper consists in providing quantitative answers to this question presenting an original methodology. After estimating unified frameworks of monetary transmission mechanisms for nine euro zone countries, we compute the national evolutions of output gap and inflation since 1999, in a fictitious context where the euro has never been launched. Using a loss function as a standard for macroeconomic stabilization, these simulations are then compared with the actual outcomes over the period 1999-2003. Our major result is that the ECB did a far better stabilization job for euro zone countries than national central banks would have done.

Suggested Citation

  • Jérôme Hericourt, 2005. "And if One Size Fit All after All? A Counterfactual Examination of the ECB Monetary Policy under Duisenberg Presidency," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-03280963, HAL.
    • Handle: RePEc:hal:cesptp:halshs-03280963
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-03280963
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    Cited by:

    1. Papaspyrou, Theodoros S., 2007. "Economic policy in EMU: community framework and national strategies - focus on Greece," LSE Research Online Documents on Economics 5631, London School of Economics and Political Science, LSE Library.

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    More about this item

    Keywords

    Taylor rules; monetary policy transmission; counterfactual simulation; stabilization; règles de Taylor; transmission de la politique monétaire; simulation contrefactuelle; stabilisation;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications

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