Abstract

GARCIA-IGLESIAS, Jesús M.; PATEIRO-RODRIGUEZ, Carlos  and  VENANCIO SALCINES, J.. On the role of the budget balance in the decisions of the European Central Bank. Inv. Econ [online]. 2011, vol.70, n.275, pp.39-61. ISSN 0185-1667.

This study inquires into whether the budgetary balance of the set of countries constituting the European Monetary Union has influenced the European Central Bank's (ecb's) determination of short term interest rates. The empirical analysis is performed using the generalized method of moments to estimate a monetary policy reaction function that includes the aforementioned fiscal variable. It was found that for the period 1999:1 to 2007:4, the budget balance was a significant variable in the ecb's reaction function.

Keywords : interest rate; European Central Bank; budget balance.