ECB Monetary Policy: “One Size Doesn’t Fit All” Problem and Its Impact on Credits Volume
|Author:||Mgr. Petr Nedvěd|
|Year:||2014 - summer|
|Leaders:|| PhDr. Jaromír Baxa Ph.D.
|Work type:|| Finance, Financial Markets and Banking
|Awards and prizes:|
|Abstract:||In this work, I analyse inappropriateness of single monetary policy in the euro area and its
impact on credit growth for the oldest twelve euro members and a time period spanning
1999Q1-2013Q3. The inappropriateness is expressed by deviations of actual interest rate from
Taylor rule prescriptions. The obtained results are in line with a majority of existing literature
since they show that the ECB’s single interest rate was the least suitable for the so called
PIIGS countries prior to the recent economic crisis. The impact of the deviations on credit
growth is estimated econometrically by dynamic panel data estimation. The findings confirm
my hypothesis that the deviations from the Taylor rule have a significant positive effect on
credits volume, i.e. the higher is the Taylor rule prescription above the actual rate, the higher
is the credit growth.