01822cas a2200241 a 4500 AALejournalIMF003544 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451861051 1018-5941 BD-DhAAL BD-DhAAL International Monetary Fund. Following Germany's Lead : Using International Monetary Linkages to Identify the Effect of Monetary Policy on the Economy. Washington, D.C. : International Monetary Fund, 2005. 1 online resource (39 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students Forward-looking behavior on the part of the monetary authority leads least squares estimates to understate the true growth consequences of monetary policy interventions. We present instrumental variables estimates of the impact of interest rates on real output growth for several European countries, using German interest rates as the instrument. We show that the difference between least squares and instrumental variables estimates provides bounds for the degree of endogeneity in monetary policy. The results confirm a considerable downward bias of estimates that do not account for potential forward-looking monetary policy decisions. The bias is higher for countries whose monetary policy was more independent of Germany. Mode of access: Internet IMF Working Papers; Working Paper ; No. 2005/086 Full text available on IMF http://elibrary.imf.org/view/journals/001/2005/086/001.2005.issue-086-en.xml IMF e-Library