The Impact of the Single Market on the Effectiveness of ECB Monetary Policy
AbstractThis paper studies the implications of Europe's single market. Small costs of international trade in goods and services may cause a large home bias in consumer spending and can explain seemingly excessive short-run exchange rate volatility. The European single market (declining costs of international trade between the euro area and the member states which have not adopted the single currency) will reduce the home bias in consumption. As a result, euro area monetary policy becomes less powerful in terms of stabilising consumption, but better able to in°uence the general price level.
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Bibliographic InfoPaper provided by Netherlands Central Bank in its series DNB Staff Reports (discontinued) with number 104.
Length: 33 pages
Date of creation: 2003
Date of revision:
trade costs; home bias; monetary transmission; exchange rate volatility;
Find related papers by JEL classification:
- F15 - International Economics - - Trade - - - Economic Integration
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-03-14 (All new papers)
- NEP-IFN-2004-03-14 (International Finance)
- NEP-MAC-2004-03-14 (Macroeconomics)
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