The Importance of Monetary Policy Made Allowance for Growth more in Euroland

Abstract

As a monetary policy management by Eurosystem, a flexible inflation target (f-IT) and a pragmatic monetary target (p-MT) which also contain concerns about the stability of the real economy seem to be better. The reason why I support it and the summary of each chapters will be given below.
In Section 1 of Chapter I, judging from monetary conditions in EMS and using macroeconomic models, EMS is a result of the core countries' lead characterised as an exchange rate target (EXT). Generally bad fundamentals' countries had the vulnerabilities and particularly suffered more pain from the increase of an interest rates. In Section 2 of Chapter I examines the period in which the third stage of EMU started, it seems that convergence of eleven member states had been promoted more in macroeconomic area, less in structural area. Thus because a convergence in structual area seems to take a relatively long time, shock absorption like OCA is limited now. Conversely, the convergence in macroeconomic area is earlier inclined to diverse and additionally each member states has a limited fiscal and monetary policy after 1999. Therefore, though each member states' efforts for structual policy become an important issues, at the same time, an appropriate central (ECB's) policy to support it is hoped.
In Section 1 of Chapter II, I suggest, because of various changes following the start of the third stage of EMU, it became possible and necessary to pursue a monetary policy made allowance for growth more. In addition the conditions for it was also fulfilled. In Section 2 of Chapter II, with regard to IT and MT used as ECB's monetary policy target by a survey of related study and ECB's actual stance, I focus on the usefulness of f-IT and p-MT which also contained concerns about the stability of the real economy. I also make mention of trasparancy and accountability which is needed to get a credibility of ECB's monetary policy. In Section 3 of Chapter II, in a survey of Euroland's economic condition in recent years, a private consumption and investment, supported by growth forecasts and low interest rate, seem to play an important role in its future growth. This means the monetary policy made allowance for growth more is an particurally important under a limited each country's own policy to recover the stagnant conditions.