A1453
Title: How fitting is one-size-fits-all: Revisiting the dynamic effects of ECB's interest policy on Euro area countries
Authors: Maybrit Waechter - University of Bamberg (Germany) [presenting]
Abstract: The purpose is to revisit the one-size-fits-all challenge posed by the European Central Banks (ECB) monetary policy within the heterogeneous economic landscape of the Eurozone. Using a dataset spanning from 1991Q1 to 2022Q1 across EU-11 countries, country-specific hypothetical Taylor rates are computed, and the dynamic effects of the Taylor Rate Gap (TRGAP) - the difference between these rates and the actual ECB policy rate - are examined on GDP growth, inflation, unemployment, and government debt. Employing local projections and panel OLS regressions, findings reveal that the TRGAP negatively impacts economic growth, with this effect being more pronounced in periphery countries compared to core countries. The analysis highlights the limitations of a uniform monetary policy in addressing the diverse economic conditions within the Eurozone, suggesting the need for a more tailored approach to foster balanced and sustainable growth across the region.
