Analysis of the Behavior of Central Banks in Setting Interest Rates. The Case of Central and Eastern European Countries

摘要

This paper aims to identify the final objectives actively pursued by central banks in Central and Eastern Europe that promote an independent monetary policy. We achieved our scope by investigating the behavior of national monetary authorities in setting short-term nominal interest rates. In this regard we estimated (based on the Generalized Method of Moments) three extensions of a monetary policy Taylor-type rule that takes into account the specifics of the selected countries-emerging economies with a high degree of openness and in full process of convergence towards the euro area. We included in the monetary policy rule additional variables targeted to financial stability in order to determine how concerned monetary authorities have approached the cleaning or mopping-up versus leaning against the wind strategies. The results revealed the main orientation towards their fundamental objective of price stability, but in parallel, to the stabilization of real economic activity and the exchange rate. However, changes in short-term nominal interest rates closely follow the changes in the Eurozone short-term nominal interest rate, while the inclusion of asset price developments indicated a heterogeneous situation among selected central banks.