Analysis of the Ecb Monetary Policy Match for the Needs of the Euro Area Countries Needs

Abstract

In this paper, using the Taylor rule (Taylor, 1993), the European Central Bank (ECB) monetary policy in 2000-2012, as well as individual interest rate needs of the euro area (EA) countries are analysed. It is assumed that the estimated Taylor rule interest rates are optimal for individual members. We have analysed whether the actual ECB interest rates and the calculated rates are different and have become more balanced towards individual countries' needs. The work focuses attention on the last period (2008)(2009)(2010)(2011)(2012) when the EA faced economic problems and an asymmetric shock. The analysis shows controversial results: on the one hand, the interest deviation mean decreases (just a little), but an increasing gap between individual needs can be seen: some countries are becoming increasingly divorced from the general EA needs. It makes them very vulnerable, and there is a risk that these countries in the face of asymmetric challenges can be "left behind" by the ECB focusing on the EA as a whole. Also, in this paper, the stationarity of the calculated deviations is analysed to help understand their nature. This approach is new, and the author is unaware of similar works. Analysis of the optimal interest rate dynamics has revealed that Germany needed the interest rates that were opposite to the needs of Spain and Greece and susceptible to divergence, so this led to the ECB difficulties in determining the proper interest for all countries' needs. The EA as a currency area is most optimal for Belgium, Cyprus, Finland, France, Italy, and the Netherlands from the interest rate setting perspective.

Inadequacy of the ECB’s monetary policy in the EU economies outside the eurozone

“…A motivation for those studies came from the doubts of economists as regards plans to create a monetary union consisting of significantly different economies. Studies on the extent of the inadequacy of the ECB's policy in individual member states continued in the subsequent years [Hayo 2006;Blanchard 2006;Flaig, Wollmershäuser 2007;Sturm, Wollmershäuser 2008;Lee, Crowley 2009;Van Poeck 2010;Reichenbachas 2013;Barigozzi, Conti, Luciani 2014;Quint 2014;1 The problems of asymmetric impact exerted by the centralized monetary policy in the monetary union were dealt with already in 1977 by H.G. Grubel.…”

Simulation analysis of the degree of inadequacy in the single monetary policy for the EU economy outside the euro zone / Symulacyjna analiza stopnia nieadekwatności jednolitej polityki pieniężnej dla unijnej gospodarki spoza strefy euro

“…An impulse to conduct those studies were doubts raised by some economists as regards the planned establishment of the monetary union consisting of considerably heterogeneous economies. Studies on the extent of inadequacy of the ECB monetary policy in individual member states were continued in subsequent years [Hayo 2006;Blanchard 2006;Flaig, Wollmershäuser 2007;Sturm, Wollmershäuser 2008;Lee, Crowley 2009;Lee, Crowley 2010;Van Poeck 2010;Reichenbachas 2013]. 3 Due to a different time range, spatial range and methodology, the conclusions differ and are not fully comparable.…”

(Nie)adekwatność polityki pieniężnej EBC w gospodarce spoza strefy euro na przykładzie Polski

“…Impulsem do ich przeprowadzenia były obawy ekonomistów w sprawie utworzenia unii walutowej, która składać się miała ze znacznie różniących się gospodarek. W kolejnych latach analizy stopnia nieadekwatności polityki EBC w państwach członkowskich strefy euro były kontynuowane (Hayo 2006;Blanchard 2006;Flaig, Wollmershäuser 2007;Sturm, Wollmershäuser 2008;Lee, Crowley 2009;Lee, Crowley 2010;Van Poeck 2010;Reichenbachas 2013;Olson, Wohar 2016;Quint 2016;Kawalec, Pytlarczyk 2016;Fritsche, Harms 2020;Cekin et al 2021) 6 . Z uwagi na różny zakres czasowy, przestrzenny oraz różnice w metodyce poszczególnych badań wnioski nie są w pełni porównywalne, niemniej jednak w wielu publikacjach zwraca się uwagę, że prowadzona przez EBC polityka nie była w jednakowym stopniu dostosowana do potrzeb poszczególnych państw strefy euro.…”