Does inflation targeting matter? An analysis of the European Central Bank common monetary policy.

摘要

The dissertation investigates the monetary policy of the European Central Bank. In particular, it investigates the appropriateness of the monetary policy rule of the European Central Bank for its member-countries economies.; The study consists of three elements. First, it obtains the weights that monetary policy attaches to the inflation and output gap. This is done by estimating a Taylor-type monetary policy rule for the aggregate EMU and for its member-countries during the EMU period and for the current EMU member-countries for the pre-EMU period. Second, it incorporates the recent developments in the macro literature by estimating the New Keynesian Phillips curve for the EMU countries in order to assess diversity of expectation formation across the EMU. And third, it estimates the EMU membership effect on inflation and output gap variability in order to assess the overall effect of the EMU membership.; Estimation results of Taylor-type rule for EMU suggest that the ECB is following output stabilizing monetary policy and not 'strict' inflation targeting policy. The individual weights assigned to an individual member country for its domestic output gap and inflation are different across countries and are different from the ECB assigned weights to inflation and output gap. Although the findings failed to provide evidence to support the contention that labor share explains inflation dynamics, the study estimates of the New Keynesian Phillips curve nonetheless suggest a very diverse price expectation formation mechanism across EMU countries. Finally, according to the empirical evidence, there has been a reduction in inflation variability in the EMU countries compared to the pre-EMU level. As to output gap variability the findings show an increase in variability.