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The 2021 review of the monetary policy strategy of the Eurosystem: an economy of forces

Author

Listed:
  • Eleni Argiri

    (Bank of Greece)

  • Ifigeneia Skotida

    (Bank of Greece)

Abstract

This study delves into the rationale behind the 2021 review of the monetary policy strategy of the Eurosystem and elaborates on the main elements of the new strategy and its implications for monetary policy-making going forward. The profound changes in the economic landscape that have taken place since the last review in 2003 prompted the European Central Bank and the euro area national central banks to embark on a comprehensive review of the monetary policy strategy of the Eurosystem. The aim has been to ensure that the strategy reflects upon these unique challenges and remains well suited in pursuit of the primary objective of price stability. The key outcome of the strategy review, unveiled in July 2021, has been the reformulation of the price stability objective so as to adopt a symmetric commitment to the 2% inflation target over the medium term, as well as the confirmation of the flexible use of unconventional monetary policy tools when the economy operates close to the effective lower bound of interest rates. In addition, the new strategy has further incorporated financial stability and climate change considerations into the monetary policy framework. The study outlines the enhancements embedded in the new strategy, as regards the fulfilment of the Eurosystem’s price stability mandate. Finally, the authors discuss the ways in which the new strategy could have, to some extent, addressed the challenges faced by the euro area and its individual members, with a focus on Greece, over the past crisis years.

Suggested Citation

  • Eleni Argiri & Ifigeneia Skotida, 2021. "The 2021 review of the monetary policy strategy of the Eurosystem: an economy of forces," Economic Bulletin, Bank of Greece, issue 54, pages 23-57, December.
    • Handle: RePEc:bog:econbl:y:2021:i:54:p:23-57
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    File URL: https://www.bankofgreece.gr/Publications/oikodelt202112.pdf
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    References listed on IDEAS

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    2. Nikolaos Vettas & Alexandros Louka & Konstantinos Peppas & Yakinthi Pountouraki & Michael Vasileiadis, 2022. "Trends in total factor productivity in Greece and its determinants during the period 2005-2019," Economic Bulletin, Bank of Greece, issue 56, pages 7-43, December.
    3. Nikos Ventouris & Georgios Palaiodimos, 2022. "Proposals for the reform of EU fiscal rules," Economic Bulletin, Bank of Greece, issue 55, pages 67-81, July.
    4. Sofia Anyfantaki & Petros Migiakis & Katerina Paisiou, 2022. "Green finance in Europe: actors and challenges," Economic Bulletin, Bank of Greece, issue 55, pages 83-105, July.
    5. Christos Antonopoulos & Sofia Anyfantaki & Theodora Kosma & Evangelia Papapetrou & Filippos Petroulakis & Pavlos Petroulas & Pinelopi Zioutou, 2022. "The Greek Labour market before and after the pandemic: slack tightness and skills mismatch," Economic Bulletin, Bank of Greece, issue 56, pages 45-74, December.
    6. Ioanna C. Bardakas, 2022. "Energy consumption by energy type and exports of goods in Greece: a comparative analysis in relation to the euro area," Economic Bulletin, Bank of Greece, issue 56, pages 75-92, December.
    7. Christos Catiforis, 2022. "Post-pandemic inflation: Phillips Curve, trends, drivers and lessons," Economic Bulletin, Bank of Greece, issue 55, pages 43-65, July.

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    More about this item

    Keywords

    European Central Bank; monetary policy; strategy review; price stability; euro area economy; inflation; effective lower bound;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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