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Portugal and the European Monetary Union.: Investigating an alternative interest rate development using the Taylor Rule
Södertörn University, School of Social Sciences.
Södertörn University, School of Social Sciences.
2012 (English)Independent thesis Basic level (degree of Bachelor), 10 credits / 15 HE creditsStudent thesis
Abstract [en]

The objective of this study is to investigate how the development regarding the short-term nominal interest rate in Portugal would have differed from that set by the ECB 1999-2011 in a situation where they did not enter the European Monetary Union. To do this, we use the Taylor rule, which incorporates economic activities such as inflation and output and how these deviates from their target. Constructing the Taylor rule, we estimate its reaction functions using an Ordinary Least Square Regression on annual data from the period 1988-1998. The reaction functions serve as weights on the deviations for inflation and output. The result reached is that the interest rate set by the ECB since 1999 is far below that interest rate required by the Portuguese economic situation. Further, we discuss how the influence in the setting of the ECB interest rate differs considering the member countries size. 

Place, publisher, year, edition, pages
2012. , 36 p.
Keyword [en]
Monetary Policy, European Monetary Union, Central Bank, Taylor Rule, Optimum Currency Area.
National Category
URN: urn:nbn:se:sh:diva-17173OAI: diva2:559603
Subject / course
Social and Behavioural Science, Law
Available from: 2012-10-10 Created: 2012-10-09 Last updated: 2012-10-10Bibliographically approved

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