Exchange Rates and Monetary Policy

Vítor Gaspar and Otmar Issing

Australian Economic Papers, 2002, vol. 41, issue 4, 342-365

Abstract: 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.

Date: 2002
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Persistent link: https://EconPapers.repec.org/RePEc:bla:ausecp:v:41:y:2002:i:4:p:342-365

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