Monetary policy rules in the pre-EMU era: Is there a common rule?

Despite the great importance and final success of the convergence process that led to the
establishment of the European Monetary Union, there is no clear agreement regarding the
monetary policy pursued in the member countries during the convergence process. This paper
contributes to the literature with an empirical analysis of the period from 1993 to 1998 that
encompasses eleven EMU countries. In particular, Taylor-type interest rate rules are estimated
with monthly national data to find that, despite certain similarities and exceptions, the rule
followed by each country is distinct and differs substantially from the standard Taylor rule.
However, for most countries, the parameter estimates reflect the principles proclaimed by the
monetary policy authorities and, in addition, it is shown that in most cases the estimated rules
reproduce the policy setting quite closely.

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