Monetary Policies of ECB and Fed in Comparison

The aim of the thesis is to compare monetary policy of the ECB and the Fed. The methodology used is to compare their actual policies and then to compare their fit to monetary policy rules which the CB's should follow. The monetary policies of the ECB and Fed are compared with respect to their monetary policy objectives, policy tools and their monetary strategies. Taylor rule is estimated for the ECB and the Fed. The results give an answer whether the banks are more output or inflation stabilizing and how well they fit the Taylor rule recommendations. Further, the estimated results show whether the classic version of Taylor rule works during the crisis. Primary hypothesis is that the Taylor rule is not followed by neither of the banks and that the classic Taylor rule does not work properly. The chosen period is from 1999Q1 to 2013Q1 so it is comparable with regards that the ECB started conduct its monetary policy in 1999.