The ECB's Monetary Analysis Revisited

63 Pages Posted: 12 Sep 2008  

Helge Berger

Free University Berlin - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Emil Stavrev

International Monetary Fund (IMF)

Thomas Harjes

International Monetary Fund (IMF)

Date Written: July 2008

Abstract

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.

Keywords: European Central Bank, Monetary policy, Central bank policy, Economic models, Asset prices, Consumer prices, Financial sector, Money

Suggested Citation

Berger, Helge and Stavrev, Emil and Harjes, Thomas, The ECB's Monetary Analysis Revisited (July 2008). IMF Working Papers, Vol. , pp. 1-61, 2008. Available at SSRN: https://ssrn.com/abstract=1266504

Helge Berger (Contact Author)

Free University Berlin - Department of Economics ( email )

Boltzmannstr. 20
Berlin 14195, 14195
Germany
+49 30 838-54037 (Phone)
+49 30 838-52782 (Fax)

HOME PAGE: http://www.wiwiss.fu-berlin.de/berger/eng_index.htm

CESifo (Center for Economic Studies and Ifo Institute for Economic Research) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany
+49 89 9224 1266 (Phone)
+49 89 9224 1409 (Fax)

HOME PAGE: http://www.CESifo.de

Emil Stavrev

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Thomas Harjes

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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