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| Antonio Ribba |
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| ''The federal funds rate and the conduction of the international orchestra'' |
| ( 2012, Vol. 32 No.4 ) |
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| In the first thirteen years of EMU, monetary policy choices of the European Central Bank (ECB) in setting the short-term interest rate have followed, systematically, monetary policy decisions made by the Federal Reserve System (Fed). For, despite the presence of variable lags with respect to Fed decisions, turning points of European short-term interest rates have been largely anticipated by movements in the federal funds rate. In this paper we show that, in the context of a bivariate cointegrated system, a clear long-run US dominance emerges. Moreover, the structural analysis reveals that a permanent increase in the federal funds rate causes a permanent one-for-one movement in the eonia rate.
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| Keywords: Monetary policy, identification, structural cointegrated VARs |
JEL: E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit: General
C1 - Econometric and Statistical Methods: General |
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| Manuscript Received : Sep 29 2012 | | Manuscript Accepted : Oct 25 2012 |
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