Premium
IS THE VIEW FROM THE EUROTOWER PURELY EUROPEAN? – NATIONAL DIVERGENCE AND ECB INTEREST RATE POLICY
Author(s) -
Heinemann Friedrich,
Huefner Felix P.
Publication year - 2004
Publication title -
scottish journal of political economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.4
H-Index - 46
eISSN - 1467-9485
pISSN - 0036-9292
DOI - 10.1111/j.0036-9292.2004.00320.x
Subject(s) - divergence (linguistics) , economics , interest rate , monetary policy , function (biology) , ordered probit , probit model , perspective (graphical) , econometrics , macroeconomics , monetary economics , mathematics , philosophy , linguistics , evolutionary biology , biology , geometry
The official view on ECB monetary policy claims that decisions are based on euro zone data and that diverging regional developments are disregarded. To test empirically whether regional developments have an impact on ECB decisions we develop a generalised monetary policy reaction function which allows for an influence of regional divergence. Reaction function estimations and a probit model of interest rate decisions for the first years of the euro area offer some first support for an impact of regional divergence. The results clarify that ignoring a potential national perspective may lead to biased estimates for the ECB reaction function.