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The ECB’s Monetary Analysis Revisited

Author/Editor: Berger, Helge | Harjes, Thomas | Stavrev, Emil
Authorized for Distribution: July 1, 2008
Electronic Access: Free Full Text (PDF file size is 927KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: Monetary aggregates continue to play an important role in the ECB's policy strategy. This paper revisits the case for money, surveying the ongoing theoretical and empirical debate. The key conclusion is that an exclusive focus on non-monetary factors alone may leave the ECB with an incomplete picture of the economy. However, treating monetary factors as a separate matter is a second-best solution. Instead, a general-equilibrium inspired analytical framework that merges the economic and monetary "pillars" of the ECB's policy strategy appears the most promising way forward. The role played by monetary aggregates in such unified framework may be rather limited. However, an integrated framework would facilitate the presentation of policy decisions by providing a clearer narrative of the relative role of money in the interaction with other economic and financial sector variables, including asset prices, and their impact on consumer prices.
 
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Series: Working Paper No. 08/171
Subject(s): European Central Bank | Monetary policy | Central bank policy | Economic models | Asset prices | Consumer prices | Financial sector | Money
Author's keyword(s): ECB | monetary analysis | monetary pillar | New Keynesian model | DSGE model | P* model | Two-pillar Phillips curve | VAR model | generalized dynamic factor model
 
English  
    Published:   July 1, 2008        
            Format:   Paper
    Stock No:   WPIEA2008171   Pages:   61
    Price:   US$18.00 (Academic Rate: US$18.00 )
       
     
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