The ECB'S Money Pillar: An Assessment
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Summary:
This paper discusses the case for a money pillar in the European Central Bank's (ECB) monetary policy strategy. Time-series evidence for industrial countries based on frequency-domain and unobserved-components analysis suggests that money can play a useful role in gauging and constraining long-run risks to price stability. Moreover, the specter of asset price bubbles and some of the area's institutional features, which may impart considerable persistence to area-wide inflation, caution against shifting to conventional inflation targeting. But the time series evidence also seems to point to a relatively loose connection between variations in nominal money growth and inflation in the short to medium run. As a consequence, effective communication of the ECB's monetary policy decisions from the point of view of the present money pillar is likely to remain a challenging task.
Series:
Working Paper No. 2003/082
Subject:
Asset bubbles Communications in revenue administration Financial crises Inflation Inflation persistence Inflation targeting Monetary policy Price stabilization Prices
English
Publication Date:
April 1, 2003
ISBN/ISSN:
9781451850468/1018-5941
Stock No:
WPIEA0822003
Pages:
32
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