{
  "title": "The Science and Art of Monetary Policy",
  "sourceUrl": "https://www.imf.org/en/publications/fandd/issues/2021/09/book-review-monetary-policy-in-times-of-crisis-ecb",
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  "summary": "The IMF’s Mahmood Pradhan reviews Monetary Policy in Times of Crisis: A Tale of Two Decades of the European Central Bank.",
  "sections": [
    {
      "heading": "Overview",
      "content": "- Review by MAHMOOD PRADHAN, nonresident fellow at the European economic think tank Bruegel.\n- Publication: F&D Magazine, September 2021.\n- Subject: Review of Monetary Policy in Times of Crisis: A Tale of Two Decades of the European Central Bank (Massimo Rostagno, Carlo Altavilla, Giacomo Carboni, Wolfgang Lemke, Roberto Motto, Arthur Saint Guilhem, and Jonathan Yiangou).\n- Book publication details as presented: Oxford University Press; Oxford, UK, 2021; 448 pp.; $115."
    },
    {
      "heading": "Major findings and analysis",
      "content": "- The book is described as a \"unique exposition\" of the analysis that draws from theory and models to inform ECB governing council deliberations, providing transparency \"more than by any other advanced economy central bank.\"\n- It offers a \"masterful analysis\" of the ECB’s challenges in its first two, \"unusually eventful and crisis-prone, decades\" and how it managed a monetary union still in the making.\n- The review highlights lesser-known ECB actions:\n  - Early behind-the-scenes effort in pushing for the creation of the European Stability Mechanism.\n  - Making the (never used) Outright Monetary Transaction instrument effective in resolving the euro area crisis.\n  - Contribution to the creation of a unified banking supervision system that reduced fragmentation and improved monetary policy transmission."
    },
    {
      "heading": "Instruments, complementarity, and transmission",
      "content": "- ECB policy instruments enumerated in the review:\n  - negative interest rates\n  - asset purchases\n  - subsidized loans to banks for onlending\n  - forward guidance on policy rates\n- The book provides \"strong empirical evidence on the complementarity between these instruments in delivering an accommodative monetary stance.\"\n- Key analytical point: these instruments together \"contain pressure on longer-term borrowing costs\" and help stem declines in longer-term inflation expectations.\n- The review notes a relevant nuance: operating in a currency union with \"very diverse financial imbalances among sovereigns and banks across the euro area\" motivates a broader toolbox—e.g., subsidized lending to ensure low interest rates are transmitted across the entire euro area."
    },
    {
      "heading": "Price stability and policy stance",
      "content": "- The ECB’s continued difficulty in meeting its price stability objective is described as a concern that \"argues for continuing its accommodative stance.\"\n- The review argues persuasively that the ECB’s instrument set has \"stemmed the decline in longer-term inflation expectations\" and that \"the counterfactual would have been worse.\""
    },
    {
      "heading": "Relevance for COVID-19 and broader audience",
      "content": "- Although the book’s analysis covers the period \"to the end of 2018,\" the authors make a convincing case that the policy tools developed over the past decade \"have been instrumental in enabling the ECB to respond quickly and forcefully to the COVID-19 pandemic.\"\n- The review asserts the \"wealth of analysis here will appeal to a much wider audience than just the experts.\"\n\nSource: IMF F&D Magazine page overview — \"The Science and Art of Monetary Policy\" (September 2021).\n\n---\n\n Content in this bundle\n\n- Book Review: The Science and Art of Monetary Policy - IMF F&D\n  - Book Review: The Science and Art of Monetary Policy - IMF F&D (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Book Review: The Science and Art of Monetary Policy - IMF F&D (PDF){rel=\"external\" type=\"application/pdf\"}\n- Arte y ciencia de la política monetaria ● Finanzas y Desarrollo ● Septiembre de 2021\n  - Arte y ciencia de la política monetaria ● Finanzas y Desarrollo ● Septiembre de 2021 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Arte y ciencia de la política monetaria ● Finanzas y Desarrollo ● Septiembre de 2021 (PDF){rel=\"external\" type=\"application/pdf\"}\n- La science et l'art de la politique monétaire\n  - La science et l'art de la politique monétaire (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - La science et l'art de la politique monétaire (PDF){rel=\"external\" type=\"application/pdf\"}\n- Книжное обозрение – Финансы и развитие – Нельзя терять время– сентябрь 2021 года\n  - Книжное обозрение – Финансы и развитие – Нельзя терять время– сентябрь 2021 года (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Книжное обозрение – Финансы и развитие – Нельзя терять время– сентябрь 2021 года (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/fandd/issues/2021/09/book-review-monetary-policy-in-times-of-crisis-ecb"
    }
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    "Authors: MAHMOOD PRADHAN",
    "Published: September 2, 2021",
    "Review by MAHMOOD PRADHAN, nonresident fellow at the European economic think tank Bruegel.",
    "Publication: F&D Magazine, September 2021.",
    "Subject: Review of Monetary Policy in Times of Crisis: A Tale of Two Decades of the European Central Bank (Massimo Rostagno, Carlo Altavilla, Giacomo Carboni, Wolfgang Lemke, Roberto Motto, Arthur Saint Guilhem, and Jonathan Yiangou).",
    "Book publication details as presented: Oxford University Press; Oxford, UK, 2021; 448 pp.; $115.",
    "The book is described as a \"unique exposition\" of the analysis that draws from theory and models to inform ECB governing council deliberations, providing transparency \"more than by any other advanced economy central bank.\"",
    "It offers a \"masterful analysis\" of the ECB’s challenges in its first two, \"unusually eventful and crisis-prone, decades\" and how it managed a monetary union still in the making.",
    "The review highlights lesser-known ECB actions:",
    "ECB policy instruments enumerated in the review:",
    "The book provides \"strong empirical evidence on the complementarity between these instruments in delivering an accommodative monetary stance.\"",
    "Key analytical point: these instruments together \"contain pressure on longer-term borrowing costs\" and help stem declines in longer-term inflation expectations.",
    "The review notes a relevant nuance: operating in a currency union with \"very diverse financial imbalances among sovereigns and banks across the euro area\" motivates a broader toolbox—e.g., subsidized lending to ensure low interest rates are transmitted across the entire euro area.",
    "The ECB’s continued difficulty in meeting its price stability objective is described as a concern that \"argues for continuing its accommodative stance.\"",
    "The review argues persuasively that the ECB’s instrument set has \"stemmed the decline in longer-term inflation expectations\" and that \"the counterfactual would have been worse.\"",
    "Although the book’s analysis covers the period \"to the end of 2018,\" the authors make a convincing case that the policy tools developed over the past decade \"have been instrumental in enabling the ECB to respond quickly and forcefully to the COVID-19 pandemic.\"",
    "The review asserts the \"wealth of analysis here will appeal to a much wider audience than just the experts.\"",
    "**Book Review: The Science and Art of Monetary Policy - IMF F&D**",
    "**Arte y ciencia de la política monetaria ● Finanzas y Desarrollo ● Septiembre de 2021**",
    "**La science et l'art de la politique monétaire**",
    "**Книжное обозрение – Финансы и развитие – Нельзя терять время– сентябрь 2021 года**"
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