Monetary Policy in the Euro Area: Strategy and Decision-Making at the European Central Bank

Cover......Page 1
Half-title......Page 3
Title......Page 5
Copyright......Page 6
Contents......Page 7
Figures......Page 9
Tables......Page 11
Acknowledgements......Page 12
Introduction......Page 13
1 Money, output and prices: the scope of monetary policy......Page 19
1.1 The long run......Page 20
1.1.1 Money and prices......Page 21
1.1.2 Money and output......Page 24
1.1.3 The costs of inflation......Page 28
1.2 The short run......Page 30
1.2.1 Money, prices and output......Page 31
2 Monetary policy making: strategies and rules......Page 44
2.1 Rules vs.discretion: the importance of credibility......Page 45
2.1.1 Commitment vs.discretion......Page 47
2.1.2 The importance of credibility......Page 49
2.2 Optimal policy......Page 51
2.3 Simple rules as policy benchmarks......Page 53
2.4 Monetary policy strategies......Page 57
3.1 Salient features of the euro area economy......Page 59
3.2.1 The harmonised index of consumer prices......Page 63
3.2.2 The new monetary aggregates......Page 66
3.3 Some tentative evidence on the monetary transmission mechanism in the euro area......Page 70
3.3.1 The monetary policy transmission mechanism......Page 71
3.3.2 A few pieces of quantitative evidence......Page 73
4.1 The mandate of the Treaty......Page 77
4.2 The ECB’s definition of price stability......Page 80
4.3 Other aspects of the definition of price stability......Page 83
5.1 What do the literature and policy experiences tell us?......Page 88
5.2 Two implications for the ECB strategy......Page 91
5.3.1 A ‘prominent role’ for money......Page 94
5.3.2 Some technical issues......Page 95
5.4 Money demand models for the euro area......Page 98
6 A broadly based assessment......Page 102
6.1 Leading indicators......Page 103
6.2 Expectations and forecasts......Page 106
7 The ECB strategy: an overall view......Page 110
7.1 The role of uncertainty in the strategy: general aspects......Page 111
7.2 Euro area-specific aspects......Page 113
7.3 A new strategy......Page 115
7.4 Two pillars, a single framework......Page 118
7.5 Recent criticisms and some answers......Page 120
8 The operational framework......Page 124
8.1.1 Open market operations......Page 126
8.2 How does the framework fulfil its main goals?......Page 131
8.3 Counterparties and eligible collateral......Page 132
8.4 The performance of the operational framework in 1999......Page 133
9 Accountability and transparency......Page 140
9.1 Accountability and independence......Page 141
9.1.1 Accountable for what?......Page 143
9.1.2 Accountable to whom?......Page 144
9.1.3 Accountable when?......Page 145
9.2 Transparency......Page 146
9.2.1 Publication of the internal inflation forecast......Page 147
9.3.1 Accountability......Page 150
9.3.2 Transparency......Page 152
10 The single monetary policy in 1999......Page 156
10.1 The announcement of the strategy......Page 157
10.2 The first monetary policy actions: 3 December 1998 and 22 December 1998......Page 160
10.3 Second policy move: 8 April 1999......Page 162
10.3.1 Monetary developments......Page 163
10.3.2 The broadly based assessment......Page 164
10.3.3 Overall assessment......Page 168
10.4.1 The evolution of the prospects for price stability......Page 171
10.4.2 Overall assessment......Page 174
ECB PRESS RELEASE......Page 177
ECB PRESS RELEASE......Page 179
ECB PRESS CONFERENCE......Page 181
ECB PRESS CONFERENCE......Page 184
ECB PRESS RELEASE......Page 187
References......Page 191
Index......Page 207