Template-type: ReDIF-Paper 1.0
Author-Name: Carlo A. Favero
Author-Name: Ruben Fernandez-Fuertes
Title: Monetary Policy in the COVID Era and Beyond: the Fed vs the ECB
Abstract: This study examines monetary policy during and post-COVID by analysing innovative specifications for monetary policy rules based on data from before the pandemic. It models trends in short-term rates using a stochastic trend, driven by potential output growth, demographic age distribution, and inflation
expectations both the US and the Eurozone. The cyclical variations in shortterm
rates are associated with monetary policy through the conventional Taylor
rule indicators. Whilst the standard model is robust for the US both in and outof-
sample, the Eurozone displays less consistent in-sample results and marked
deviations in out-of-sample tests. Addressing the ECB’s concerns about bond
market fragmentation doesn’t yield better results. Instead, a model in which
the ECB follows the US example with caution and delay proves more effective.
Classification-JEL:  E43, E52, G12.
Keywords: Monetary Policy Rules, Trends and Cycles, Fed, ECB.
Length: 28 
Number: 23209
Creation-Date: 2023
File-URL: https://repec.unibocconi.it/baffic/baf/papers/cbafwp23209.pdf
File-Format: application/pdf
File-Size: 
Handle: RePEc:baf:cbafwp:cbafwp23209