The thesis analyses the observance of the Taylor rule in the monetary policy of the European Central Bank. For the purposes of the analytical part of the thesis, we firstly focus on the detailed presentation of the European Central Bank, inflation, production efficiency and the Taylor rule. The data clearly show that the European Central Bank followed the Taylor rule in varying degrees between 2001 and 2019, with the most pronounced deviations being observed after 2015, 2016, when the Taylor rule suggested positive interest rates, especially due to the growing and positive production gaps, and the European Central Bank kept them at zero. The year 2008, which marks the beginning of the global financial crisis, turns out to be the key turning point between the different preferences of countries. Before 2008, the Taylor rule suggested higher interest rates to most countries in comparison to those set by the European Central Bank. After 2008, however, the main refinancing operations (MRO) rate becomes too high for countries that are most indebted while it is too low for countries that quickly recover from the crisis. During the analysis, we also conclude that the European Central Bank attached more importance to the output gap before 2008 than at the beginning of the crisis in 2008. Although the Taylor rule is a useful guideline in determining interest rates and its observance could partially contribute to the prevention of the financial crisis in 2008, it is still, according to some, flawed, mainly due to the failure to take into account some other important economic indicators.
|
