A bivariate model of Fed and ECB main policy rates
By: Chiara Scotti
Contributors: Board of Governors of the Federal Reserve System (U.S.)
Series: International finance discussion papers -- no. 875; International finance discussion papers (Online) -- no. 875.
Publisher: Federal Reserve Board
Published: 2006
Place of publication: Washington, D.C
Language: eng
Format: [electronic resource] /
Description: "This paper studies when and by how much the Fed and the ECB change their target interest rates.  I develop a new nonlinear bivariate framework, which allows for elaborate dynamics and potential interdependence between the two countries, as opposed to linear feedback rules, such as a Taylor rule, and I use a novel real-time data set.  A Bayesian estimation approach is particularly well suited to the small data sample.  Empirical results support synchronization between the central banks and non-zero correlation between mag- nitude shocks, but they do not support follower behavior.  Institutional factors and inflation represent relevant variables for timing decisions of both banks.  Inflation rates are important factors for magnitude decisions, while output plays a major role in US magnitude decisions"--Federal Reserve Board web site.
Notes: Title from PDF file as viewed on 1/11/2007.

Includes bibliographical references.

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Mode of access: World Wide Web.