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

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  • Canova, Fabio
  • Favero, Carlo A

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.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5101.

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Date of creation: Jun 2005
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Handle: RePEc:cpr:ceprdp:5101

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Keywords: communication; EU newcomers; pillars; transmission;

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  1. Fabio Canova, 2005. "The transmission of US shocks to Latin America," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(2), pages 229-251.
  2. Frederic S. Mishkin, 2004. "Can Central Bank Transparency Go Too Far?," NBER Working Papers 10829, National Bureau of Economic Research, Inc.
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  8. Boldrin, Michele & Canova, Fabio, 2003. "Regional Policies and EU Enlargement," CEPR Discussion Papers 3744, C.E.P.R. Discussion Papers.
  9. Issing, Otmar, 2001. "The Euro Area and the Single Monetary Policy," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 6(4), pages 277-88, October.
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  14. Bj�rn-Roger Wilhelmsen & Andrea Zaghini, 2011. "Monetary policy predictability in the euro area: an international comparison," Applied Economics, Taylor & Francis Journals, vol. 43(20), pages 2533-2544.
  15. Luca Benati, 2003. "Evolving Post-World War II U.K. Economic Performance," Computing in Economics and Finance 2003 171, Society for Computational Economics.
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  17. Bartosz Mackowiak, 2005. "What does the Bank of Japan do to East Asia?," SFB 649 Discussion Papers SFB649DP2005-059, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  18. William Poole, 2001. "Central bank transparency: why and how?," Speech 51, Federal Reserve Bank of St. Louis.
  19. William Poole, 1999. "Communicating the stance of monetary policy," Speech 73, Federal Reserve Bank of St. Louis.
  20. Marek Jarocinski, 2006. "Responses to Monetary Policy Shocks in the East and the West of Europe: A Comparison," Working Papers 124, Oesterreichische Nationalbank (Austrian Central Bank).
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