This paper examines the trade-off between exchange rate stability and monetary autonomy for a target zone. Using the guilder-mark target zone in the pre-EMU period as a case study, we empirically estimate how much policy discretion the Dutch central bank still enjoyed and how much had been ceded...

This paper analyzes how imperfect exchange rate pass-through affects the transmission of the CPI inflation targeting optimal monetary policy. In the short run, delayed pass-through constraints monetary policy more than incomplete pass-through and interest rate smoothing amplifies this effect. In...

Should one think of zero nominal interest rates as an undesirable liquidity trap or as the desirable Friedman rule? I use three different frameworks to discuss this issue. First, I restate Cole and Kocherlakota's (1998) analysis of Friedman's rule: short run increases in the money stock -...

This paper studies the transmission of common monetary shocks across European countries by using a dynamic factor model (Forni-Reichlin (1998)). This technique allows to extract the common European monetary shock and to compute country-specific responses. Our identification employs rotations of...

This paper investigates the degree and nature of economic and monetary policy relations among the United States, the euro area, and the British area. Using daily interest rates, we estimate the impact of monetary policy announcements of a Central Bank on its domestic market and in what measure...

This paper investigates the dynamic effects of monetary and fiscal policy in a monetary union, which is characterized by asymmetric interest rate transmission. This asymmetry gives rise to intertemporal reversals in the relative effectiveness of policy on member country outputs. The direction...

This paper investigates the degree and nature of economic and monetary policy relations among the United States, the Euro area, and Great Britain. Using daily interest rates, we estimate the impact of monetary policy announcements of a Central Bank on its domestic market and in what measure...

This report is the final output of the study "Economic and Monetary Union and Enlargement" commissioned by the Directorate-General for Research of the European Parliament in May 1999. An Interim Report was provided in September 1999. The report reviews the mains policy issues concerning the...

Monetary policy has an important role in the determination of the inflation rate and the output gap time trajectories. Monetary authorities should choose the nominal interest rate time path that best serves the goals of price stability (primarily) and output growth (as a consequence of the...

Monetary policy has been usually analyzed in the context of small macroeconomic models where central banks are allowed to exploit a limited amount of information. Under these frameworks, researchers typically derive the optimality of aggressive monetary rules, contrasting with the observed...