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La Banque centrale et l'Union monétaire européennes : les tribulations de la crédibilité

  • Jérôme Creel
  • Jacky Fayolle

Discussing credibility basing upon the Barro-Gordon model, we change the framework substituting workers with financial markets. Results show without surprise that a central bank willing to gain credibility should set inflation at a low level during a long period to lead expectations towards this level. This explains the adoption by the ECB of a low price stability target. The multiple-equilibria nature of the model necessitates that monetary policy should be implemented in coordination with governments. Of course, the Euro area is still heterogeneous, so that the ECB should adopt a « structural » rather than « monetarist » representation of the European economy, at least because European monetary aggregates have no homogenous counterparts in the European money demand. The ECB would concentrate on the global and diversified impact of the interest rate rather than on the illusory control of a monetary aggregate. JEL codes : E52, E58.

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Article provided by Presses de Sciences-Po in its journal Revue de l'OFCE.

Volume (Year): n° 83 bis (2002)
Issue (Month): 5 ()
Pages: 211-244

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Handle: RePEc:cai:reofsp:reof_074_0211
Contact details of provider: Web page: http://www.cairn.info/revue-de-l-ofce.htm

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