The evolution of monetary policy strategies in Europe

Book abstract:

This study analyses the evolution of monetary policy strategies in Europe, written primarily from a policy-maker's perspective, and provides a comprehensive review of the advances in European monetary policy-making over the past decades. The main concern of the book is to determine the considerations featuring in monetary strategy choice and how they have appeared in and been influenced by recent European monetary history. The author seeks to analyse the lessons that have been learnt, or should have been learnt, mapping out the diverse monetary traditions that now flow together under the aegis of the European System of Central Banks.

The book is split into two main parts. The first part assesses the monetary strategy choice from a conceptual and normative viewpoint. In this section, the first chapter, Key considerations governing the choice of monetary policy strategy covers the nature of shocks that affect the economy, structural characteristics of the economy, such as wage flexibility and labour mobility, macroeconomic objectives and the credibility of monetary policy. The second chapter, Targeting options for monetary policy, looks at the targeting of money, domestic credit, interest rates, exchange rates, nominal income and direct inflation. The second part of the book reviews the practical experience with alternative monetary policy strategies in Europe. It analyses how these strategies have evolved, seeking to explain why the individual European countries have adopted such varying strategies in the past. Chapters cover: The historical setting; The evolution of money targeting, 1975-1998; The evolution of exchange rate targeting; The evolution of inflation targeting, 1992-1998; and The monetary policy strategy of the Eurosystem. Appendices provide a tabular summary, for each of the current EU members, of the pre-announced monetary policy targets and outcomes for every year since 1975, which should prove useful for reference purposes.

The author is currently head of the Monetary Analysis Division at De Nederlandsche Bank and is also a member of the Monetary Policy Committee of the European System of Central banks.