Monetary Policy Switching in the Euro Area and Multiple Equilibria: An Empirical InvestigationReportar como inadecuado

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1 GREQAM - Groupement de Recherche en Économie Quantitative d-Aix-Marseille 2 Centre de recherche de la Banque de France 3 CEPII - Centre d-Etudes Prospectives et d-Informations Internationales

Abstract : This paper provides evidence that the European Central Bank ECB has adjusted its interest rate since 1999 nonlinearly according to the macroeconomic and financial environment in the euro zone. Its policy function is described by a Taylor rule with regime shifts implying that the stance of reaction to the inflation-gap and output-gap has varied according to the credit risk in the private and sovereign bond markets, the monetary base and past levels of inflation, output and the shocks affecting the European economies. We provide evidence of regimes corresponding to low to high levels of inflation with the possibility of a situation near a zero low bound ZLB for the interest rate. We study the implications of such a rule for the economy in a simple new-Keynesian framework and show that it is consistent with several stable long-run steady states equilibria among which one that is consistent with the recent situation of a near liquidity trap in the euro area. We also find that around this liquidity trap steady state the equilibrium is locally determinate for most plausible parameter values. We discuss the issue of moving from a situation of low nominal interest rate to a policy that have been more typically implemented in the past by relying on an analysis of the impact of shocks supply and demand to the economy.

keyword : nonlinear Taylor rules multiple steady state equilibria euro area

Autor: Gilles Dufrénot - Anwar Khayat -



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