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- Title
Modeling interest rate setting at the European Central Bank with bargaining models and counterfactuals.
- Authors
McNeil, James
- Abstract
I analyze whether the interest rate decisions of the European Central Bank (ECB) favor the national interests of the largest euro-area member states. Because voting records are unavailable, unobserved monetary policy preferences are based on hypothetical interest rate paths generated from monetary policy rules estimated in the pre-euro era. Comparing the actual euro-area interest rate to these counterfactual interest rates, I do not find that ECB interest rates are best described by competing national interests. Instead, countries appear to make decisions with respect to euro-area economic conditions. These findings contradict several studies which find that policy disproportionately favors the national objectives of larger member states.
- Subjects
EUROPEAN Central Bank; RATE setting; MONETARY policy; COUNTERFACTUALS (Logic); EUROZONE; NEGOTIATION; MONETARY unions; INTEREST rates
- Publication
Empirical Economics, 2024, Vol 66, Issue 3, p1037
- ISSN
0377-7332
- Publication type
Article
- DOI
10.1007/s00181-023-02481-z