Monetary and Fiscal Policy in the European Monetary Union

Jurgen von-Hagen and Matthias Bruckner
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Jurgen von-Hagen: Center for European Integration Studies, U Bonn, IN U, and CEPR
Matthias Bruckner: Center for European Integration Studies, U Bonn
Authors registered in the RePEc Author Service: Juergen von Hagen

Monetary and Economic Studies, 2002, vol. 20, issue S1, 123-154

Abstract: The introductory phase of the European Monetary Union (EMU) ended with the introduction of the euro currency in 2002. We present a review of the experiences with the new monetary union. Using a Taylor rule, we analyze the conduct of monetary policy by the European Central Bank (ECB). The empirical results suggest that the ECB applies similar weights to inflation and the output gap as the Bundesbank in the past, but more than proportionate weight to economic developments in Germany and France. Next, we show that the link between monetary developments and inflation in the euro area is empirically very stable. ECB monetary policy was too loose in the first four years to keep inflation below the ECB's upper limit of 2 percent defining price stability. In the last section, we analyze the fiscal framework of EMU and show that it has not succeeded in safeguarding fiscal discipline, especially in the large member states.

JEL-codes: E52 E62 F36 (search for similar items in EconPapers)
Date: 2002
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:ime:imemes:v:20:y:2002:i:s1:p:123-154

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