Considerations on the Monetary Policy Framework of the European Central Bank

Andrea Giorgio Tosato ()
Additional contact information
Andrea Giorgio Tosato: Central Bank of Malta

No WP/01/2022, CBM Working Papers from Central Bank of Malta

Abstract: This working paper offers some considerations on the monetary policy framework of the European Central Bank. The trade-offs arising from adopting a point target configuration over a range target one are assessed in terms of their flexibility vs. inflation anchoring properties. This layout is then confronted with the policy framework in use in the euro area prior to the adoption of the new monetary strategy, which is interpreted as leaning on the side of flexibility. The increased likelihood of dis-anchoring of long-term inflation expectations experienced in the euro area since 2013, however, suggests that the policy framework could benefit from a rebalancing towards a formulation with stronger anchoring properties. The inflation aim of the ECB could thus be reformulated with the introduction of a symmetric 2%-point target. By evaluating this arrangement in terms of the price stability definition, two regions emerge where either the policy aim (symmetric 2%-point target) or the price stability definition (between 0% and 2%) are satisfied, but not both. To avoid any inconsistency in the policy framework, an inflation aim centred at 2% requires an amendment of the price stability definition.

JEL-codes: E42 E52 E58 (search for similar items in EconPapers)
Pages: 55 pgs
Date: 2022
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.centralbankmalta.org/site/Reports-Arti ... 22.pdf?revcount=9127 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mlt:wpaper:0122

Access Statistics for this paper

More papers in CBM Working Papers from Central Bank of Malta
Bibliographic data for series maintained by Emmanuel Cachia ( this e-mail address is bad, please contact ).