{
  "title": "Monetary Frameworks: Is There a Preferred Option for the European Central Bank?",
  "publication": "IMF Policy Discussion Papers, June 1, 1997",
  "sourceUrl": "https://www.imf.org/en/publications/imf-policy-discussion-papers/issues/2016/12/30/monetary-frameworks-is-there-a-preferred-option-for-the-european-central-bank-2242",
  "canonical": "https://www.imf.org/en/publications/imf-policy-discussion-papers/issues/2016/12/30/monetary-frameworks-is-there-a-preferred-option-for-the-european-central-bank-2242",
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  "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.",
  "sections": [
    {
      "heading": "Main findings and conjectures",
      "content": "- The paper's main conjecture: the European Central Bank ought to target inflation if monetary union is confined to a “core” group of countries.\n- If monetary union is EU-wide, the choice between targeting inflation or monetary aggregates is not unambiguous; the appropriate framework will depend on the type of shocks that are likely to prevail.\n- The arguments motivating these conjectures concern trade-offs between the viability and credibility of different monetary frameworks."
    },
    {
      "heading": "Analysis of framework choice",
      "content": "- Size of the monetary union in Europe influences the choice of the monetary framework.\n- Inflation targeting is favored under a core-only monetary union due to implied trade-offs in viability and credibility.\n- For an EU-wide monetary union, the optimal framework depends on shock characteristics; no single framework is unambiguously superior across all shock scenarios.\n- Key themes: trade-offs between viability and credibility of inflation targeting versus monetary aggregate targeting."
    },
    {
      "heading": "Policy implications and recommendations",
      "content": "- Consider inflation targeting when monetary union membership is concentrated in a core group of countries.\n- For an EU-wide union, assess the dominant types of shocks (their nature and frequency) before selecting between inflation targeting and monetary aggregate targeting.\n- Policymakers should weigh credibility and viability explicitly when designing the ECB’s monetary framework."
    },
    {
      "heading": "Keywords and subject focus",
      "content": "- Subjects: Demand for money; Economic integration; Inflation targeting; Monetary aggregate target; Monetary aggregates; Monetary policy; Monetary unions; Money.\n- Keywords (as provided): 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.\n\nSource: Ramana Ramaswamy, \"Monetary Frameworks: Is There a Preferred Option for the European Central Bank?\", IMF Policy Discussion Papers 1997, 006 (1997).\n\n---\n\n Content in this bundle\n\n- Monetary Frameworks: Is There a Preferred Option for the European Central Bank? -PPAA/97/06\n  - Monetary Frameworks: Is There a Preferred Option for the European Central Bank? -PPAA/97/06 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Monetary Frameworks: Is There a Preferred Option for the European Central Bank? -PPAA/97/06 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/imf-policy-discussion-papers/issues/2016/12/30/monetary-frameworks-is-there-a-preferred-option-for-the-european-central-bank-2242"
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    "Authors: Ramana Ramaswamy",
    "Published: June 1, 1997",
    "Series: IMF Policy Discussion Papers",
    "DOI: https://doi.org/10.5089/9781451972030.003",
    "The paper's main conjecture: the European Central Bank ought to target inflation if monetary union is confined to a “core” group of countries.",
    "If monetary union is EU-wide, the choice between targeting inflation or monetary aggregates is not unambiguous; the appropriate framework will depend on the type of shocks that are likely to prevail.",
    "The arguments motivating these conjectures concern trade-offs between the viability and credibility of different monetary frameworks.",
    "Size of the monetary union in Europe influences the choice of the monetary framework.",
    "Inflation targeting is favored under a core-only monetary union due to implied trade-offs in viability and credibility.",
    "For an EU-wide monetary union, the optimal framework depends on shock characteristics; no single framework is unambiguously superior across all shock scenarios.",
    "Key themes: trade-offs between viability and credibility of inflation targeting versus monetary aggregate targeting.",
    "Consider inflation targeting when monetary union membership is concentrated in a core group of countries.",
    "For an EU-wide union, assess the dominant types of shocks (their nature and frequency) before selecting between inflation targeting and monetary aggregate targeting.",
    "Policymakers should weigh credibility and viability explicitly when designing the ECB’s monetary framework.",
    "Subjects: Demand for money; Economic integration; Inflation targeting; Monetary aggregate target; Monetary aggregates; Monetary policy; Monetary unions; Money.",
    "Keywords (as provided): 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.",
    "**Monetary Frameworks: Is There a Preferred Option for the European Central Bank? -PPAA/97/06**"
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