2017年-CEPS欧洲政策研究中心_Time_for_the_ECB_to_normalise_its_monetary_policy_Insights_from_the_Taylor_rule_4页_641kb

Time for the ECB to Normalise Monetary Policy?

Core Content

The document discusses whether the European Central Bank (ECB) should normalise its monetary policy, given the current macroeconomic environment in the euro area. It evaluates the appropriateness of the ECB's current low-interest rates and large-scale asset purchase programme (APP) by comparing them with the Taylor rule, a framework for determining optimal interest rates based on inflation, output gap, and the equilibrium real interest rate.

Key Information

• Timeframe: Eight years have passed since the start of the financial crisis.
• ECB's Policy Actions:
  • Maintained the main policy rate below 1% since July 2012.
  • Went below zero for the deposit facility rate in March 2014.
  • Launched a large asset purchase programme (APP) in March 2015 due to the inability to further cut rates.
• Inflation Measures:
  • Headline Inflation: Volatile due to energy price fluctuations.
  • Core Inflation: More stable, averaging 1.2% since 2008.
  • GDP Deflator: A broader measure that captures production and income-related price changes, not affected by taxes or input price movements.
• ECB's Mandate: Price stability, defined as an inflation rate below but close to 2%, using the Harmonised Index of Consumer Prices (HICP) as the benchmark.
• Current Inflation Trends:
  • Headline inflation has fluctuated, with recent oil price increases bringing it close to 2%.
  • Core inflation for May 2017 was 0.93%, slightly lower than the April high of 1.24%.

Main Arguments

• Relevance of Inflation Indicators:
  • The authors argue that in economies with high debt burdens, the HICP may not be the best measure of inflationary or deflationary pressures.
  • They propose using the GDP deflator instead, as it better reflects the real burden of debt.
• Taylor Rule Application:
  • The Taylor rule is used to estimate the optimal interest rate based on inflation, output gap, and the equilibrium real interest rate.
  • The rule suggests that the ECB should have raised interest rates in 2015, but instead, it further eased monetary conditions through the APP.
  • The authors present two estimates: one based on the output gap as it was at the time of the policy decision and another based on the current output gap.
• Shadow Interest Rate:
  • CEPII (2016) estimates the shadow interest rate, which represents the policy rate without the zero lower bound.
  • The shadow rate would have dropped below -3%, indicating that the ECB's current policy is significantly more accommodative than what would be considered normal under the Taylor rule.
• Macro-Economic Signals:
  • The ECB has traditionally relied on consumer price inflation as the primary indicator.
  • However, the authors suggest that the recovery in the euro area is becoming more solid and persistent, indicating that macroeconomic fundamentals are improving.
  • This implies that the ECB may need to consider exiting from its unconventional policies, such as negative interest rates and asset purchases, as they are no longer necessary.

Conclusion

• The document concludes that the ECB should begin the process of normalising monetary policy, as the current low rates and asset purchases are no longer justified.
• The authors argue that the Taylor rule, when applied with the GDP deflator and updated output gap estimates, suggests a need for policy tightening.
• Mario Draghi's four prerequisites for changing monetary policy, which are based on consumer price inflation, may soon be met, indicating that the ECB is at a turning point in its policy stance.

References

• Alcidi, C., Busse, M., and D. Gros (2016), "Is there a need for additional monetary stimulus? Insights from the original Taylor Rule", CEPS Policy Brief No. 342.
• European Commission (2017), "AMECO database".
• Eurostat (2015), "HICP Methodology".
• CEPII (2016), “Through the lenses of the natural rate of interest, European monetary policy appears to be too loose since 2015”.