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Evolution of the ECB’s analytical framework

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  • Holm-Hadulla, Fédéric
  • Musso, Alberto
  • Rodriguez-Palenzuela, Diego
  • Vlassopoulos, Thomas

Abstract

This paper discusses the role of economic and monetary analysis in the monetary policy strategy of the European Central Bank (ECB). Both areas of analysis have evolved since the 2003 strategy review. Economic analysis has assigned an increasingly relevant role to the Eurosystem and ECB staff macroeconomic projections in forming a view on the medium-term outlook for economic activity and inflation. Furthermore, its focus has strengthened with regard to structural trends in shaping key economic relationships. Similarly, monetary analysis has shifted in focus: while the 2003 review emphasised the information value of monetary dynamics for detecting risks to price stability over medium-term to longer-term horizons, the focus of monetary analysis has increasingly been redirected to the assessment of monetary policy transmission. This evolution has opened a gap between the formal description of the strategy following the 2003 review and the practice of economic and monetary analysis in informing the ECB’s policy deliberations. This paper concludes by presenting options for closing this gap and aligning the strategy formulation with the evolved role of economic and monetary analysis. JEL Classification: E32, E37, E44, E47, E51, E52, E58

Suggested Citation

  • Holm-Hadulla, Fédéric & Musso, Alberto & Rodriguez-Palenzuela, Diego & Vlassopoulos, Thomas, 2021. "Evolution of the ECB’s analytical framework," Occasional Paper Series 277, European Central Bank.
    • Handle: RePEc:ecb:ecbops:2021277
    Note: 1624014
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    Cited by:

    1. Corbisiero, Giuseppe & Lawton, Neil, 2021. "The ECB’s Review of its Monetary Policy Strategy," Quarterly Bulletin Articles, Central Bank of Ireland, pages 70-103, October.
    2. Fegatelli, Paolo, 2022. "A central bank digital currency in a heterogeneous monetary union: Managing the effects on the bank lending channel," Journal of Macroeconomics, Elsevier, vol. 71(C).

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    More about this item

    Keywords

    ECB two-pillar framework; Economic analysis; monetary analysis;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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