What does "below, but close to, two per cent" mean? Assessing the ECB's reaction function with real time data

Show full item record

Title: What does "below, but close to, two per cent" mean? Assessing the ECB's reaction function with real time data
Author: Haavio, Markus ; Jalasjoki, Pirkka ; Kilponen, Juha ; Paloviita, Maritta
Series: International Journal of Central Banking
Series volume: 17
Series number: 2 (June)
Year of publication: 2021
Publication date: 1.6.2021
Published in: Published also in BoF DP 29/2017
Pages: 125-170
Keywords: inflaatio; tavoitteet; rahapolitiikka; euroalue; hinnat; EKP; reaktiofunktiot; hintavakaus; säännöt; Taylorin sääntö; uskottavuus; eurojärjestelmä
JEL: E31; E52; E58
Other keywords: credibility; inflation target; monetary policy; realtime projections; Taylor rule
Abstract: Using unique real-time quarterly macroeconomic projections of the Eurosystem/ECB staff, we estimate competing specifications of the ECB's monetary policy reaction function. We consider specifications which include inflation and output growth projections, a past inflation gap, a time-varying natural real interest rate, and different inflation targets. Our first key finding is that the de facto inflation target of the ECB lies between 1.6 percent and 1.8 percent. Our second key finding is that the ECB reacts both to short-term macroeconomic projections and to past deviations of inflation from its de facto target.
Link: https://www.ijcb.org/journal/ijcb21q2a4.htm


Files in this item

Files Size Format View

There are no files associated with this item.

This item appears in the following Collection(s)

Show full item record