A Taylor Rule for EU members. Does one rule fit to all EU member needs? Stephanos Papadamou a, * , Moise Sidiropoulos b, c , Aristea Vidra d a University of Thessaly, Department of Economics, Greece b Aristotle University of Thessaloniki, Greece c University of Strasbourg, France d Aristotle University of Thessaloniki, Department of Economics, Greece ARTICLE INFO JEL codes: E52 E58 E44 Keywords: ECB monetary policy Taylor Rule Financial crisis Asymmetries ABSTRACT The recent global financial crisis has unsettled the broad acquiescence that has predominated concerning the goals of a Central Bank for years. The viewpoint that the monetary policy makers have to ignore financial stability has started to decay. This paper examines to what extent the ECB's monetary policy decisions are determined by the signals of the financial sphere. This goal is achieved by using the Taylor Rule augmented by variables that can attribute the financial element in order for the behavior of the ECB to be described. This way gives us the opportunity to compare the rates proposed by the Taylor Rule by those that were finally observed not only for the Eurozone in total, but also for some of its member countries individually. The estimations that come from the GMM for the periods before and during the financial crisis provide us with in- dications concerning the effects of the financial sector over the conduct of the ECB's Monetary Policy as well as the defective operation of the Eurozone. It seems that a common rule does not fit to all members given several observed asymmetries across some members. 1. Introduction From the beginning of the global financial crisis in 2007, concerns about the financial stability/instability have grown up. Considering the role of monetary policy, it has not been determined whether Central Banks (CB) should be responsible not only for the conventional targets but also for the financial stability. The question has been thoroughly discussed and analyzed by the global economic research community, without any explicit conclusion. A widespread view asserts that while seeking the objective of price stability, the CB in fact promotes better financial stability (Schwartz, 1995). The opposing view contends that the financial system is inherently fragile and the CB has occasionally endangered the objective of price stability when financial stability is threatened (Kent & Debelle, 1998). Practically, these studies gave birth in two search directions developed throughout the next section. This paper has a dual purpose. Initially, it is investigated if and to what extent the decisions of the ECB monetary policy guided by economic instability signals. For this reason, a backward-looking monetary policy rule is preferred while forward-looking models have been used recently. Recently, Chortareas, Magonis, and Panagiotidis (2012) provides evidence for the asymmetry of the New Keynesian Phillips Curve in the euro-area using both forward and backward looking inflation variable. However, as Albulescu, Goyeau, and Pepin * Corresponding author. Department of Economics University of Thessaly, 78, October 28th street, Volos, 38333, Greece. E-mail addresses: stpapada@uth.gr (S. Papadamou), msidiro@econ.auth.gr (M. Sidiropoulos), aristea_vi@hotmail.com (A. Vidra). Contents lists available at ScienceDirect The Journal of Economic Asymmetries journal homepage: www.elsevier.com/locate/jeca https://doi.org/10.1016/j.jeca.2018.e00104 Received 30 May 2018; Received in revised form 22 August 2018; Accepted 22 August 2018 1703-4949/© 2018 Published by Elsevier B.V. The Journal of Economic Asymmetries 18 (2018) e00104