This paper analyses whether Taylor-type policy rules can be used to describe monetary policy in the U.S., Germany, and the euro area between 1992-2004, and if the interest rate setting in one currency area influences monetary policy in another. The easiest way to test the relationship between the monetary policies of two banks is to compare the two reaction functions and incorporate the decision variable of one central bank into the other bank’s reaction function. The estimations indicate a monetary policy link between the two currency areas, the U.S., and the euro area.

Ullrich, Katrin (2005), Comparing the Fed and the ECB Using Taylor-Type Rules, Applied Economics Quarterly 51 (3), 247-266.


ECB, Federal Reserve, monetary policy, Taylor-type rules