The author wishes to thank Vlad Ardelean, Klaus Herrmann, Jürgen Kähler, Sara Zinnecker and two anonymous referees for very helpful comments and suggestions.
QUANTIFYING THE EUROPEAN CENTRAL BANK'S INTEREST RATE SMOOTHING BEHAVIOR*
Article first published online: 27 SEP 2012
© 2012 The Author. The Manchester School © 2012 John Wiley & Sons Ltd and The University of Manchester
The Manchester School
Volume 81, Issue 4, pages 470–492, July 2013
How to Cite
PINKWART, N. (2013), QUANTIFYING THE EUROPEAN CENTRAL BANK'S INTEREST RATE SMOOTHING BEHAVIOR. The Manchester School, 81: 470–492. doi: 10.1111/j.1467-9957.2012.02296.x
Manuscript received 4.3.11; final version received 2.8.11.
- Issue published online: 18 JUN 2013
- Article first published online: 27 SEP 2012
Against the background of the recent discussion whether the smoothing behavior of the Fed detected by empirical Taylor rules is indeed a fact or rather a statistically fiction, this paper re-examines the empirical evidence for interest rate smoothing for the case of the European Central Bank (ECB). Based on data representing true ECB behavior, our findings reject the hypothesis of no smoothing but also find a role of serially correlated shocks. The degree of smoothing is estimated in the range of [0.38;0.82], reflecting model uncertainty with respect to the output gap and indicating a rather moderate extent of partial adjustment.