One Interest Rate for All - Has the European Central Bank Enough Instruments?

2011 ◽  
Author(s):  
Rainer Willi Maurer
Keyword(s):  
Interest Rate ◽  
Central Bank ◽  
European Central Bank ◽  
European Central

scholarly journals Comparison of the Approach of the Czech National Bank and the European Central Bank to the Effects of the Global Financial Crisis

2021 ◽  
Vol 10 (2) ◽  
pp. 18-46
Author(s):  
Andrea Cecrdlova
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Financial Crisis ◽  
Central Bank ◽  
European Central Bank ◽  
Global Financial Crisis ◽  
Central Banks ◽  
European Central ◽  
National Bank ◽  
The Global Financial Crisis

The latest global crisis, which fully erupted in 2008, can have a significant impact on central banks credibility in the long run. During the last crisis, monetary authorities encountered zero interest rate levels and, as a result, started to use non-standard monetary policy instruments. The Czech National Bank decided to use a less standard instrument in November 2013, when it started to intervene on the foreign exchange market in order to keep the Czech currency at level 27 CZK / EUR. However, the European Central Bank also adopted a non-standard instrument, when chose a path of quantitative easing in 2015 in order to support the euro area economy by purchasing financial assets. The question remains whether the approach of Czech National Bank or the approach of European Central Bank in the crisis and post-crisis period was a more appropriate alternative. With the passage of time from the global financial crisis, it is already possible to compare the approaches of these two central banks and at least partially assess what approach was more appropriate under the given conditions. When comparing the central banks approaches to the crisis, the Czech National Bank was better, both in terms of the rate of interest rate cuts and the resulting inflation with regard to the choice of a non-standard monetary policy instrument. The recent financial crisis has revealed the application of moral hazard in practice, both on behalf of the European Central Bank and the Czech National Bank, which may have a significant impact on their credibility and independence in the coming years.

Großbritannien – ein europäischer Spielverderber? Das britische Opting-Out aus ökonomischer Sicht

1996 ◽  
Vol 45 (3) ◽  
Author(s):  
Philip Nölling
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Central Bank ◽  
Interest Rates ◽  
European Central Bank ◽  
Short Term ◽  
Economic Reason ◽  
Opting Out ◽  
European Central ◽  
The Uk

AbstractWith the beginning of EMU there will be only one monetary policy with a single short term interest rate. In order for common monetary policy to be successful EMU member states have to react similarly to monetary signals from the European Central Bank (ECB). Because of its unique sensitivity to short term interest rates, this would not be the case for the UK. If, for example, the ECB would raise the short term interest rates by an amount which is appropriate for countries like France and Germany, the UK might sink into recession. This shows that besides political reasons there is also an economic reason for the UK’s opting-out from EMU.

Estimating the ECB Policy Reaction Function

2006 ◽  
Vol 7 (1) ◽  
pp. 1-34 ◽  
Author(s):  
Kai Carstensen
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Central Bank ◽  
European Central Bank ◽  
Probit Model ◽  
Ordered Probit ◽  
Reaction Function ◽  
Baseline Model ◽  
European Central ◽  
Policy Reaction Function

Abstract This paper estimates the policy reaction function of the European Central Bank in the first four years of EMU using an ordered probit model which accounts for the fact that central bank rates are set at multiples of 25 basis points. Starting from a baseline model which mimics the Taylor rule, the impacts of different economic variables on interest rate decisions are analysed. It is concluded that the monetary growth measure which was announced by the ECB as the first pillar of their monetary strategy does not play an outstanding role for the actual interest rate decisions. More sophisticated measures like the money overhang which uses information from both pillars are better suited. Overall, it is concluded that the revision of the monetary policy strategy in May 2003 which implied a downgrading of the first pillar will not induce any observable changes in monetary policy decisions.

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