Interest Rate Setting by the Fed, the ECB, the Bank of Japan and the Bank of England Compared

• Published in: Comparative economic studies Vol. 52; no. 4; pp. 549 - 574
• Main Authors: Gerdesmeier, Dieter, Mongelli, Francesco, Roffia, Barbara
• Format: Journal Article
• Language: English
• Published: London Palgrave Macmillan UK 01.12.2010; Palgrave Macmillan; Palgrave Macmillan Ltd. (Springer)
• Series: Comparative Economic Studies
• Subjects: Asymmetry; Central banks; Comparative analysis; Decision making; E40; E52; E58; Economics; Economics and Finance; Europe; Eurozone; Federal Reserve monetary policy; Inflation; Interest rates; International Economics; Japan; Management; Monetary policy; Open economies; Political Economy/Economic Systems; Price stability; Regular Article; Studies; U.S.A; United Kingdom; United States; Europe; Japan; United Kingdom > UK; United States > US; E40; E58; monetary policy committees; E52; central banks and their policies; monetary policy
• ISSN: 0888-7233; 1478-3320
• DOI: 10.1057/ces.2010.15

In this paper we compare the policy responsiveness of the Federal Reserve System, the European Central Bank, the Bank of Japan and the Bank of England. At first glance we find substantial differences in the frequency and amplitude of monetary policy decisions. Differences in the actual implementation of monetary policy are, however, less pronounced when seen through the ‘lenses’ of diverse specifications of monetary policy rules – including a variant of the growth rule and a specification accounting for asymmetric preferences. In fact, all four central banks seem to pursue their respective price stability objective. The observed similarities might be due, inter alia , to the fact that they operate in four of the world's largest and most open economies, and are, therefore, subject to relatively similar domestic but also international economic fundamentals.