272 - ECB Policy-Making and the Financial Crisis

DNB Working Papers
Date 21 December 2010

We estimate Taylor rule models for the euro area using Consensus Economics forecasts of inflation and output growth for the period 1998.6-2010.8. We first examine whether the recent financial crisis has affected ECB policies. Our results indicate that the ECB puts stronger emphasis on maintaining price stability than earlier point estimates suggested. Next, we analyse whether economic developments in individual euro area countries affect ECB decisions. Despite the diverging economic developments in the countries in the euro area, notably during the recent financial crisis, we do not find support for the view that policy decisions have been influenced by regional developments.

Keywords: Taylor rule, ECB, regional influence, real time data.

JEL classification : C22, E52.