Monetary Frameworks: Is There a Preferred Option for the European Central Bank?

June 1, 1997

Preview Citation

Format: Chicago

Ramana Ramaswamy. Monetary Frameworks: Is There a Preferred Option for the European Central Bank?, (USA: International Monetary Fund, 1997) accessed September 20, 2024

Summary

This paper discusses how the size of the monetary union in Europe can influence the choice of the monetary framework. The main conjecture is that the European Central Bank ought to target inflation if monetary union is confined to a “core” group of countries. However, the decision on whether to target inflation or monetary aggregates is not an unambiguous one if monetary union is EU-wide; the choice of the framework will depend on the type of shocks that are likely to prevail. The arguments motivating these conjectures essentially concern the trade-offs between the viability and credibility of different monetary frameworks.

Subject: Demand for money, Economic integration, Inflation targeting, Monetary aggregate target, Monetary aggregates, Monetary policy, Monetary unions, Money

Keywords: Demand for money, ECB's action, EMU, Encompassing monetary union, Europe, Explicit inflation targeting, Inflation, Inflation targeting, Inflation targeting framework, Monetary aggregate target, Monetary aggregates, Monetary policy, Monetary targeting, Monetary union, Monetary unions, PDP, Single currency

Publication Details

Pages:

22
Volume:

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DOI:

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Issue:

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Series:

Policy Discussion Paper No. 1997/006
Stock No:

PPIEA0061997
ISBN:

9781451972030
ISSN:

1564-5193

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