Exchange Rates and Monetary Policy

24 Pages Posted: 13 Jan 2003

See all articles by Vitor Gaspar

Vitor Gaspar

European Commission

Otmar Issing

Center for Financial Studies (CFS)


This paper looks at the relation between exchange rates and monetary policy. It focuses in particular on the role of the exchange rate of the euro in the context of the ECB's monetary policy strategy. The objective of monetary policy is to maintain price stability. The euro area is a large and relatively closed economy. Therefore, the exchange rate of the euro is not an intermediate target nor is it an objective. Nevertheless, the ECB's stability-oriented monetary policy strategy does not neglect the exchange rate of the euro. Clearly, exchange rate developments are taken into account both when looking at the transmission mechanism of monetary policy and when assessing the current economic situation and prospects for the euro area.

Suggested Citation

Gaspar, Vitor and Issing, Otmar, Exchange Rates and Monetary Policy. Available at SSRN:

Vitor Gaspar (Contact Author)

European Commission ( email )

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+49 69 1344 7200 (Phone)
+49 69 1344 6575 (Fax)

Otmar Issing

Center for Financial Studies (CFS) ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323

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