Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/197979 
Year of Publication: 
2019
Citation: 
[Journal:] DIW Weekly Report [ISSN:] 2568-7697 [Volume:] 9 [Issue:] 20/21 [Publisher:] Deutsches Institut für Wirtschaftsforschung (DIW) [Place:] Berlin [Year:] 2019 [Pages:] 179-187
Publisher: 
Deutsches Institut für Wirtschaftsforschung (DIW), Berlin
Abstract: 
Twenty years after the introduction of the euro, this Weekly Report uses an empirical analysis to assess the performance of monetary policy in the EMU founding states. It is often claimed that the monetary policy of the European Central Bank (ECB) cannot outperform its national predecessors, as the euro area countries experience different business cycles yet share a common interest rate. However, the present analysis shows that the ECB's common monetary policy has been more adept at stabilizing the economy than most of its national predecessors from the perspective of the member states. With a common currency, European monetary policy has also become largely independent of exchange rates. However, the central bank is unable to counter long-term macroeconomic imbalances. To protect euro area countries from crises more effectively, priority should be given to reforming the monetary union and fiscal policy as well as to completing the Banking Union and the Capital Markets Union. Mistakes in crisis management must be openly discussed in order to address the temptation some have to renationalize economic and monetary policy; the ECB's monetary policy should not be a scapegoat.
Subjects: 
Economic and Monetary Union
ECB
Euro Area
Structural Vector Autoregressions
Monetary Policy Stress
Sign Restrictions
Heteroskedasticity
JEL: 
C32
E42
E52
F45
Persistent Identifier of the first edition: 
Document Type: 
Article

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