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Will the Monetary Pillar Stay? A Few Lessons from the UK

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  • Paolo PAESANI

Abstract

The ECB formulates its policy relying on two-pillars: the monetary pillar and alternative models of inflation. The two-pillars strategy has been seriously criticized and there is a chance that it will be reconsidered at some point in the future. This paper elaborates on this possibility, concentrating on the monetary pillar and drawing suggestions from the analysis of monetary policy in the UK. The choice of the UK is motivated by the fact that the Bank of England walked all the way from monetary targeting to the informational approach to money (and inflation targeting). As the ECB is currently threading the same path, and finding troubles on the way, the aim of the paper is to work out a map of the risks laying ahead, learning from the experience of someone who has been there before.

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  • Paolo PAESANI, 2003. "Will the Monetary Pillar Stay? A Few Lessons from the UK," Economics Working Papers ECO2003/10, European University Institute.
    • Handle: RePEc:eui:euiwps:eco2003/10
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    Cited by:

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    More about this item

    Keywords

    monetary policy; cointegration; demand for money;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money

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