krause_03

Emory University
Department of Economics
Working Papers

Title: Measuring Monetary Policy Efficiency in European Union Countries : The Pre-EMU Years *

Number: 03-11

Author: Stefan Krause

Issue Date: May 2003 (revised, October 2004)

Abstract: This paper proposes a method for measuring the contribution of improved monetary policy to the changes in macroeconomic performance identified with inflation and output stability. Our technique involves estimating actual and optimal policy rules as a function of the aggregate supply and demand shocks, with the purpose of examining how much of the change in performance can be accounted for by changes in the volatility of the aggregate shocks and how much can be ascribed to improvements in policy efficiency.
We study the change from the 1980s to the 1990s in macroeconomic performance for 14 European Union countries. Our findings suggest that improved monetary policy has played an important stabilization role in almost all European Union countries, while a diminished exposure to aggregate shocks has largely contributed towards improved performance in at least seven countries.

ICFAI Journal of Monetary Economics, forthcoming

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Title:	Measuring Monetary Policy Efficiency in European Union Countries : The Pre-EMU Years *
Number:	03-11
Author:	Stefan Krause
Issue Date:	May 2003 (revised, October 2004)
Abstract:	This paper proposes a method for measuring the contribution of improved monetary policy to the changes in macroeconomic performance identified with inflation and output stability. Our technique involves estimating actual and optimal policy rules as a function of the aggregate supply and demand shocks, with the purpose of examining how much of the change in performance can be accounted for by changes in the volatility of the aggregate shocks and how much can be ascribed to improvements in policy efficiency. We study the change from the 1980s to the 1990s in macroeconomic performance for 14 European Union countries. Our findings suggest that improved monetary policy has played an important stabilization role in almost all European Union countries, while a diminished exposure to aggregate shocks has largely contributed towards improved performance in at least seven countries.