The Interplay of Economic Reforms and Monetary Policy: The Case of the Euro Area
24 Pages Posted: 21 Sep 2012
Date Written: September 3, 2012
Abstract
The world has been struck by a mutating systemic financial crisis that is unprecedented in terms of financial losses and fiscal costs, geographic reach, and speed and synchronisation. The crisis from August 2007 to date can be divided into three main phases: the financial turmoil from August 2007 to the collapse of Lehman Brothers; the global financial crisis from September 2008 until spring 2010; and the euro area sovereign debt crisis from spring 2010 to the current period. While each phase has brought significant challenges, the current sovereign debt crisis has been the most critical stage for the euro area. It has brought unprecedented challenges for the monetary union and triggered extraordinary adjustments in both monetary policy and institutional arrangements at the euro area level. The purpose of this article is to outline the features of each crisis phase, to describe the actions taken by the European Central Bank (ECB) during each phase and to explain the rationale for such measures. It also discusses the need to strengthen further the economic union in order to guarantee the sustainability of the monetary union of the euro area. In this respect, it is argued that the recent institutional adjustments made at the EU level would have been necessary independently of the financial crisis.
Keywords: monetary policy decision-making, Eurosystem, financial crisis, financial and institutional reforms
JEL Classification: D78, E52, E58, G01, H12
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Empirical Estimates of Reaction Functions for the Euro Area
By Dieter Gerdesmeier and Barbara Roffia
-
An Empirical Comparison of Bundesbank and ECB Monetary Policy Rules
By Jon Faust, John H. Rogers, ...
-
Regional Influences on U.S. Monetary Policy: Some Implications For Europe
By Ellen E. Meade and Nathan Sheets
-
Is the View from the Eurotower Purely European? - National Divergence and ECB Interest Rate Policy
-
Using Taylor Rules to Understand ECB Monetary Policy
By Stephan Sauer and Jan-egbert Sturm
-
Interest Rate Reaction Functions and the Taylor Rule in the Euro Area
-
One Size Must Fit All: National Divergences in a Monetary Union
By Daniel Gros and Carsten Hefeker
-
Monetary Policy Reaction Functions: ECB Versus Bundesbank
By Bernd Hayo and Boris Hofmann