Monetary Frameworks: Is There a Preferred Option for the European Central Bank?

Ramana Ramaswamy

No 1997/006, IMF Policy Discussion Papers from International Monetary Fund

Abstract: This paper discusses how the size of the monetary union in Europe can influence the choice of the monetary framework. The main conjecture is that the European Central Bank ought to target inflation if monetary union is confined to a “core” group of countries. However, the decision on whether to target inflation or monetary aggregates is not an unambiguous one if monetary union is EU-wide; the choice of the framework will depend on the type of shocks that are likely to prevail. The arguments motivating these conjectures essentially concern the trade-offs between the viability and credibility of different monetary frameworks.

Keywords: PDP; encompassing monetary union; monetary union; monetary policy; inflation; EMU; Inflation targeting; Monetary targeting; explicit inflation targeting; inflation targeting framework; single currency; ECB's action; Monetary unions; Monetary aggregates; Demand for money; Monetary aggregate target; Europe (search for similar items in EconPapers)
Pages: 22
Date: 1997-06-01
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