Link to the University of Pittsburgh
Link to the University Library SystemContact us link
AEI Banner

Interest Rate Setting at the ECB Following the Financial and Sovereign Debt Crises, in Real-Time

Bouvet, Florence. and King, Sharmila (2011) Interest Rate Setting at the ECB Following the Financial and Sovereign Debt Crises, in Real-Time. [Conference Proceedings]

[img]
Preview
PDF - Published Version
Download (240Kb) | Preview

    Abstract

    This paper examines European Central Bank (ECB) policy decisions to adjust the repo rate. We estimate a forward-looking, ordered-logit model using real-time and expectations data. In particular, we investigate the impact of the 2007-2009 financial and sovereign debt crises on the ECB interest rate policy. We find that the repo rate is more likely to rise when real economic activity (economic sentiment) is strong, and the ECB's decision to increase the repo rate is not affected by inflation forecasts. We find the ECB responds to an increasing sovereign risk premium by lowering the repo rate. In addition, we examine whether the change in ECB Presidency from Willem Duisenberg to Jean-Claude Trichet and the recent financial crisis induced a policy shift. We do not find a regime switch from the Duisenberg presidency to Trichet presidency, but we find that the financial crisis has reduced the importance of the exchange rate, and also how strongly the ECB reacts to improvements in economic activity.

    Export/Citation:EndNote | BibTeX | Dublin Core | ASCII (Chicago style) | HTML Citation | OpenURL
    Social Networking:
    Item Type: Conference Proceedings
    Subjects for non-EU documents: EU policies and themes > EU institutions & developments > European Central Bank
    EU policies and themes > Policies & related activities > economic and financial affairs > monetary policy
    EU policies and themes > Policies & related activities > economic and financial affairs > financial crisis 2008-on/reforms/economic governance
    Subjects for EU documents: UNSPECIFIED
    EU Series and Periodicals: UNSPECIFIED
    EU Annual Reports: UNSPECIFIED
    Conference: European Union Studies Association (EUSA) > Biennial Conference > 2011 (12th), April 23-25, 2011
    Depositing User: Phil Wilkin
    Official EU Document: No
    Language: English
    Date Deposited: 05 Jan 2020 10:52
    Number of Pages: 30
    Last Modified: 05 Jan 2020 10:52
    URI: http://aei.pitt.edu/id/eprint/52630

    Actions (login required)

    View Item

    Document Downloads