Money supply growth and inflation – the monetary policy strategy of the European Central Bank

The main aim of this article is to find out whether there is a significant relationship between money supply growth and inflation in the Eurozone. For this reason, the monetary policy strategy of the European Central Bank (ECB) has been evaluated. Since the establishment of the ECB in January 1999 to May 2003 the ECB‘s monetary policy strategy consisted of three main elements: a quantitative definition of price stability, a prominent role for money in the assessment of risks to price stability (aggregate M3 as a reference value), and a broadly based assessment of the outlook for price developments. Nevertheless, since May 2003 M3 or any other monetary aggregate has lost its prominent role in the ECB‘s strategy. Therefore the nowadays ECB‘s monetary policy strategy consists of a quantitative definition of the primary objective of price stability and an analytical framework based on two pillars – economic analysis and monetary analysis. These two pillars are used by the ECB‘s Governing Council in the overall assessment of risks to price stability and in monetary policy decisions.The empirical part of this article is based on time series correlation between money supply growth and inflation in selected member countries of the Economic and Monetary Union (EMU - Eurozone) during the period 1995–2005. The time series are divided into two parts. The first part covers data for selected member countries of the European Union from 1995 till 1998, i.e. before the establishment of the EMU. Whereas the second part includes data for the whole Eurozone since its official start in 1999 to 2005. The time series are adjusted by SARIMA models.

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Section 6 The European Central Bank

The EU Treaties and the Charter of Fundamental Rights ◽

10.1093/oso/9780198759393.003.422 ◽

2019 ◽

Author(s):

Marcus Klamert ◽

Manuel Kellerbauer ◽

Jonathan Tomkin

Keyword(s):

Monetary Policy ◽

Central Bank ◽

European Central Bank ◽

Primary Objective ◽

Price Stability ◽

European Central

Article 282 provides for the ESCB, consisting of the ECB together with the NCBs (NCBs). Within the ESCB, the Eurosystem, comprised of the ECB and the NCBs of MS whose currency is the euro, conducts the Union’s monetary policy. The primary objective of the ESCB is to maintain price stability. The ECB is charged with authorizing the use of the euro and is independent in all respects.

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Learning and the monetary policy strategy of the European Central Bank

Journal of International Money and Finance ◽

10.1016/j.jimonfin.2004.08.003 ◽

2004 ◽

Vol 23 (7-8) ◽

pp. 997-1010 ◽

Cited By ~ 1

Author(s):

G.C. Lim ◽

Paul D. McNelis

Keyword(s):

Monetary Policy ◽

Central Bank ◽

European Central Bank ◽

Policy Strategy ◽

European Central

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The price stability oriented monetary policy of the European Central Bank

Comparative Economic Research ◽

10.2478/v10103-009-0035-2 ◽

2010 ◽

Vol 13 (3) ◽

pp. 5-15

Author(s):

Wojciech Gasiński ◽

Anna Misztal

Keyword(s):

Monetary Policy ◽

Central Bank ◽

European Central Bank ◽

Central Banks ◽

Primary Objective ◽

Price Stability ◽

Economic Policies ◽

European Central ◽

Consumer Prices ◽

European System

The aim of this paper is to present the price stability oriented monetary policy of the European Central Bank. The European Central Bank began activities in 1998 and the primary objective of the European System of Central Banks is to maintain price stability and the ESCB should also support the general economic policies in the Community. Monetary policy is a special tool that national governments and central banks uses to influence on its economy, especially to control the supply of money and to influence on the level of economic indicators. This paper investigates the assumed objective of the European System of Central Banks which is to maintain price stability. What is more, we would like to present the monetary policy strategy of the European Central Bank and analysis of the Harmonized Index of Consumer Prices.

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A NEW ERA FOR MONETARY POLICY: CHALLENGES FOR THE EUROPEAN CENTRAL BANK

The Singapore Economic Review ◽

10.1142/s0217590817400033 ◽

2017 ◽

Vol 62 (01) ◽

pp. 57-86 ◽

Cited By ~ 4

Author(s):

AD VAN RIET

Keyword(s):

Monetary Policy ◽

Central Bank ◽

Interest Rates ◽

European Central Bank ◽

Global Financial Crisis ◽

Balance Sheet ◽

Price Stability ◽

Lender Of Last Resort ◽

New Era ◽

European Central

Since the start of the global financial crisis, the European Central Bank (ECB) has faced exceptional challenges in fulfilling its price stability mandate, marking the start of a new era of monetary policy-making for the eurozone. This paper reviews the ECB’s evolving response from mid-2007 to early-2015, showing how it combined the standard tool of adjusting its policy interest rates with non-standard passive and active balance-sheet measures, accompanied by a forward guidance of its intended monetary stance. Altogether, the ECB stayed focused on price stability while fulfilling the two classical roles of lender of last resort to resolve money market tensions and market maker of last resort to repair monetary transmission. Addressing the many challenges was complicated by the nexus between fragile banks and vulnerable governments, the ensuing financial fragmentation and the complex institutional and political structure of the eurozone. Looking ahead, the new reinforced European financial architecture could make the ECB’s monetary policy task of maintaining price stability for the eurozone easier to accomplish.

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The Stability of Emu-wide Money Demand Functions and the Monetary Policy Strategy of the European Central Bank

Manchester School ◽

10.1111/1467-9957.00189 ◽

2000 ◽

Vol 68 (2) ◽

pp. 184-202 ◽

Cited By ~ 17

Author(s):

Annick Bruggeman

Keyword(s):

Monetary Policy ◽

Central Bank ◽

Money Demand ◽

European Central Bank ◽

Demand Functions ◽

Policy Strategy ◽

European Central ◽

The Stability

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Trust in the European Union project and the role of ECB

Economia Politica ◽

10.1007/s40888-021-00229-5 ◽

2021 ◽

Author(s):

Giorgio Liotti ◽

Rosaria Rita Canale

Keyword(s):

European Union ◽

Monetary Policy ◽

Central Bank ◽

European Central Bank ◽

Yield Curve ◽

The European Union ◽

Policy Action ◽

Policy Strategy ◽

European Central ◽

Union Project

AbstractWas the European Central Bank able to assure the relaunch of the European project after the weakening of the post-crisis period? To answer this question, this paper presents an empirical analysis connecting citizen trust in the European Union with a variable intended to be a measure of the monetary policy strategy of the European Central Bank, namely, the interest rate on government bonds extracted from the 1-year maturity yield curve. The dynamic panel technique, applied to nineteen Eurozone countries for the time span of 2004–2018, estimates the presence of a long-run common relationship between the variables despite allowing different short-run adjustment mechanisms. Results are revealed to be not univocal: the easy monetary policy strategy is associated for the whole period with a decline of trust, and therefore, despite its impressiveness, it was not sufficient to relaunch the European Union project. However, when considering the change in strategy of the post-2013 period, it seemed to have contributed to a slight inversion of the decline of trust. These results highlight the importance of non-conventional measures and call for further support from coordinated policy action as a response to the negative shock deriving from the COVID-19 pandemic.

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