Monetary Policy in the Euro Area: Lessons from Five Years of ECB and Implications for Turkey

49 Pages Posted: 8 Aug 2005

See all articles by Fabio Canova

Fabio Canova

BI Norwegian Business School

Carlo A. Favero

Bocconi University - Department of Economics; Bocconi University - Department of Finance; Centre for Economic Policy Research (CEPR)

Date Written: June 2005

Abstract

We examine monetary policy in the euro area from both theoretical and empirical perspectives. We discuss what theory tells us the strategy of Central banks should be and contrasts it with the one employed by the ECB. We review accomplishments (and failures) of monetary policy in the euro area and suggest changes that would increase the correlation between words and actions; streamline the understanding that markets have of the policy process; and anchor expectation formation more strongly. We examine the transmission of monetary policy shocks in the euro area and in some potential member countries and try to infer the likely effects occurring when Turkey joins the EU first and the euro area later. Much of the analysis here warns against having too high expectations of the economic gains that membership to the EU and euro club will produce.

Keywords: Pillars, communication, transmission, EU newcomers

JEL Classification: C11, E12, E32, E62

Suggested Citation

Canova, Fabio and Favero, Carlo A., Monetary Policy in the Euro Area: Lessons from Five Years of ECB and Implications for Turkey (June 2005). CEPR Discussion Paper No. 5101, Available at SSRN: https://ssrn.com/abstract=779185

Fabio Canova (Contact Author)

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442
Norway

Carlo A. Favero

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy

Bocconi University - Department of Finance ( email )

Via Roentgen 1
Milano, MI 20136
Italy

HOME PAGE: http://www.igier.unibocconi.it\favero

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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