Are public preferences reflected in monetary policy reaction functions?

Arbeitspapier

In this paper, we test whether public preferences for price stability (obtained from the Eurobarometer survey) are actually reflected in the interest rates set by eight central banks. We estimate augmented Taylor (1993) rules for the period 1976-1993 using the dynamic GMM estimator. We find, first, that interest rates do reflect society's preferences since the central banks raise rates when society's inflation aversion is above its long-run trend. Second, the reaction to inflation is non-linearly increasing in the degree of inflation aversion. Third, this emphasis on fighting inflation does not have a detrimental effect on output stabilization. We conclude with some implications concerning the democratic legitimation of central banks.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: MAGKS Joint Discussion Paper Series in Economics ; No. 21-2013

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Social Choice; Clubs; Committees; Associations ; Price Level; Inflation; Deflation ; Interest Rates: Determination, Term Structure, and Effects ; Monetary Policy ; Central Banks and Their Policies
• Thema: Central Bank ; Democratic Legitimation ; Eurobarometer ; Inflation Aversion ; Monetary Policy ; Public Preferences ; Taylor Rules

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Neuenkirch, Matthias
• Ereignis: Veröffentlichung
• (wer): Philipps-University Marburg, Faculty of Business Administration and Economics
• (wo): Marburg
• (wann): 2013

Weitere Informationen

• Handle: http://hdl.handle.net/10419/73073
• Letzte Aktualisierung: 10.03.2025, 11:42 MEZ