Fundamentals of Monetary Policy in the Euro Area: Concepts – Markets – Institutions

Cover......Page 1
Fundamentals of Monetary Policy in the Euro Area: Concepts – Markets – Institutions......Page 2
©......Page 3
Contents......Page 4
1 Introduction and motivation......Page 12
2.2 Some economic concepts......Page 13
2.3 Some statistical concepts......Page 14
3.2 The roadmap to EMU......Page 18
3.3 Convergence criteria......Page 22
3.4 The concept of an optimal currency area......Page 23
3.5 Advantages and disadvantages of a monetary union......Page 24
3.6 Some controversies about the road......Page 25
4.1 Learning objectives......Page 27
4.3 The European Central Bank......Page 28
4.4 Presidents of the European Central Bank......Page 30
4.6 A closer look at the U.S. Federal Reserve System......Page 31
4.7 A closer look at the Bank of Japan......Page 32
4.9 Decision-making modalities......Page 33
4.10 Independence and accountability......Page 34
5.2 Basic concepts......Page 38
5.3 Effects of inflation......Page 39
5.4 Measuring inflation......Page 40
5.6 Measurement problems......Page 42
6.2 The Quantity Theory......Page 44
6.3 The Phillips Curve......Page 45
6.4 The P-Star Approach......Page 48
6.5 The aggregate supply and demand models......Page 49
6.6 The frequency decomposition approach......Page 51
6.7 Role and limitations of monetary policy......Page 52
6.8 Empirical evidence for the euro area......Page 53
7.2 Intermediate targets and indicators......Page 57
7.3 Monetary policy strategies......Page 58
7.4 The monetary policy strategy of the ECB......Page 62
7.5 Definition and role of money......Page 64
8.2 Functions of the financial system......Page 68
8.3 Direct and indirect finance......Page 71
8.4 Financial institutions......Page 72
9.2 Basic considerations......Page 74
9.3 Present value and future value......Page 75
9.4 Determinants of interest rates......Page 76
9.5 Determinants of the term structure......Page 77
10.2 Basic considerations......Page 82
10.3 Some key interest rates worldwide......Page 83
11.3 Types of bonds......Page 85
11.4 Calculating the value of a bond......Page 86
11.5 Bond ratings......Page 87
12.2 Basic considerations......Page 89
12.3 Calculating the value of a stock......Page 90
12.4 Technical and fundamental analysis......Page 92
12.5 Stock market indices......Page 93
13.2 Basic considerations......Page 95
13.3 Purchasing power parity......Page 97
13.4 Interest rate parity......Page 101
13.5 Exchange market interventions......Page 107
13.6 Exchange rate regimes......Page 108
13.7 ERM II......Page 109
14.2 Basic considerations......Page 112
14.4 Swaps......Page 113
14.5 Options......Page 114
14.6 Credit Default Swaps......Page 115
15.2 Forms of efficiency......Page 117
15.3 Behavioural finance......Page 119
16.2 Monetary aggregates......Page 120
16.3 The money supply process......Page 127
16.4 Money demand......Page 130
16.5 On the control of money supply......Page 139
16.6 The monetary policy transmission process......Page 140
16.7 Time lags of monetary policy......Page 145
16.8 Interest–rate decisions of the ECB......Page 146
16.9 Monetary policy instruments in the euro area......Page 149
16.10 Monetary policy in times of financial crisis......Page 151
16.11 Enhanced credit support......Page 155
16.13 Three-year longer-term refinancing operations......Page 156
16.14 Outright Monetary Transactions......Page 157
16.16 TARGET-2 issues......Page 159
16.17 The way forward......Page 160
17.3 Monetary Condition Indices......Page 162
17.4 The McCallum rule......Page 165
17.5 The Taylor rule......Page 166
17.6 Monetary indicators......Page 170
18.2 Asset price imbalances......Page 176
18.3 Some historical examples......Page 178
18.4 Detecting asset price booms and busts......Page 180
18.5 Early warning indicator models......Page 181
18.6 Monetary policy, asset and consumer prices......Page 182
18.7 Monetary policy responses......Page 184
19 Questions for review......Page 187
20 List of symbols and abbreviations......Page 190
21 Glossary......Page 192
22 References......Page 198
23 Endnotes......Page 224