Working Paper: CEPR ID: DP2067
Authors: Paul De Grauwe; Hans Dewachter; Yunus Aksoy
Abstract: In this paper we analyse the effects of different decision rules in the ECB on monetary stability. We consider a model where asymmetric shocks and divergent propagation of shocks on output and inflation are potential causes of tensions within the ECB concerning the conduct of monetary (interest rate) policy. Given divergence of desired interest rates (due to the asymmetries) we analyse the effect of different voting procedures within the Governing Council of the ECB. Welfare implications are discussed.
Keywords: EMU; linear feedback rules; monetary stability
JEL Codes: E52; F33; F36; F42
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| preferences of ECB members (E58) | monetary policy outcomes (E52) |
| euro-wide perspective (F01) | interest rates effectiveness for inflation stabilization (E43) |
| nationalistic perspective (F52) | tensions and inefficiencies in ECB (E58) |
| nationalistic perspective (F52) | frustration among council members (D70) |