Tag Archive | "ECB"

Effects of ECB Monetary Policy: Differences in Policy Interest Rates

This article examines the effects of the European Central Bank’s (ECB’s) monetary policy on the economy in the Euro area. Existing studies have not conclusively determined whether the effects of the policy are large or small, effective or ineffective. Also, the difference between policy interest rate increases and decreases has not been fully studied. Using two types of VAR models, this article shows that, as expected, the ECB’s monetary policy designed to boost the economy is effective in inflation stabilization, depreciation of the euro, and production improvement. Also, the impact of policy interest rate increases on inflation rate is negative (i.e., effective). However, the results of other cases are not clear empirically. To maintain price stability is the ECB’s primary objective, so it can be concluded that the ECB in general has conducted monetary policy successfully.

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Posted in Economics, Knowledge Management, Volume IV, Issue no. 5