The paper derives the monetary policy reaction function implied by money growth targeting. It consists of an interest rate response to deviations of the inflation rate from target, to the change in the output gap, to money demand shocks and to the lagged interest rate. In the second part, it is...

We estimate forward-looking interest rate reaction functions in the spirit of Taylor (1993) for four major central banks augmented by implicit volatilities of stock market indices to proxy financial market stress. Our results suggest that the Bank of England, the Federal Reserve Bank and the...

The European Central Bank has assigned a special role to money in its two pillar strategy and has received much criticism for this decision. In this paper, we explore possible justifications. The case against including money in the central bank's interest rate rule is based on a standard model...

As of today, estimating interest rate reaction functions for the Euro Area is hampered by the short time span since the conduct of a single monetary policy. In this paper we circumvent the common use of aggregated data before 1999 by estimating interest rate reaction functions based on a panel...

The financial crisis has deeply affected money markets and thus, potentially, the proper functioning of the interest rate channel of monetary policy transmission. Therefore, we analyze the effectiveness of monetary policy in steering euro area money market rates looking at, first, the...

The paper develops an empirical no-arbitrage Gaussian affine term structure model to explain the dynamics of the German term structure of interest rates from 1979 through 1998. In contrast to most affine term structure models two risk factors that drive the dynamics are linked to observable...

This paper studies optimal monetary policy responses in an economy featuring sectorial heterogeneity in the frequency of price adjustments. It shows that a central bank facing heterogeneous nominal rigidities is more likely to behave less aggressively than in a fully sticky economy. Hence, the...

The Eurosystem's main refinancing operations (MRO) are key for the interbank money market and the monetary transmission process in the euro area. This paper investigates how money market rates respond to the information revealed by various aspects of an MRO auction outcome. Our results confirm...