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Fundamentals of Monetary Policy in the Euro Area

Concepts – Markets – Institutions

Fundamentals of Monetary Policy in the Euro Area
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ISBN: 978-87-403-0763-4
2 edition
Pages : 276
Price: Free

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Summary

This book attempts to inform the reader in a comprehensive and accessible way about the analytical background and institutional setting of euro area monetary policy.

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About the book

  1. Description
  2. Preface
  3. Content
  4. About the Author
  5. Embed

Description

This book attempts to inform the reader in a comprehensive and accessible way about the analytical background and institutional setting of euro area monetary policy. Based on a rigorous description of selected financial markets and their driving forces, the theory and practice of monetary policy are explained in detail and illustrated by a number of up-to-date real world examples.

Preface

Central banks are among the most powerful actors in today’s financial markets. At the same time, and despite a recent trend towards more transparency, little is known about their structures, the way they work in practice and the way they arrive at concrete decisions – there is still a mysterious aura around these institutions. This book aims at shedding more light at central banks and monetary policy, with a particular focus at the euro area.

Content

  1. Introduction and motivation
  2. Basic concepts
    1. Learning objectives
    2. Some economic concepts
    3. Some statistical concepts
  3. A short history of EMU
    1. Learning objectives
    2. The roadmap to EMU
    3. Convergence criteria
    4. The concept of an optimal currency area
    5. Advantages and disadvantages of a monetary union
    6. Some controversies about the road
  4. Institutions
    1. Learning objectives
    2. The European Central Bank
    3. Presidents of the European Central Bank
    4. The Rise of the Euro
    5. A closer look at the U.S. Federal Reserve System
    6. A closer look at the Bank of Japan
    7. A closer look at the Bank of England
    8. Decision-making modalities
    9. Independence and accountability
  5. Inflation
    1. Learning objectives
    2. Basic concepts
    3. Effects of inflation
    4. Measuring inflation
    5. Core and non-core inflation
    6. Measurement problems
  6. Causes of inflation
    1. Learning objectives
    2. The Quantity Theory
    3. The Phillips Curve
    4. The P-Star Approach
    5. The aggregate supply and demand models
    6. The frequency decomposition approach
    7. Role and limitations of monetary policy
    8. Empirical evidence for the euro area
  7. Monetary policy strategies
    1. Learning objectives
    2. Intermediate targets and indicators
    3. Monetary policy strategies
    4. The monetary policy strategy of the ECB
    5. Definition and role of money
  8. Financial markets
    1. Learning objectives
    2. Functions of the financial system
    3. Direct and indirect finance
    4. Financial institutions
  9. Interest rates
    1. Learning objectives
    2. Basic considerations
    3. Present value and future value
    4. Determinants of interest rates
    5. Determinants of the term structure
  10. Money markets
    1. Learning objectives
    2. Basic considerations
    3. Some key interest rates worldwide
  11. Bond markets
    1. Learning objectives
    2. Basic considerations
    3. Types of bonds
    4. Calculating the value of a bond
    5. Bond ratings
  12. Stock markets
    1. Learning objectives
    2. Basic considerations
    3. Calculating the value of a stock
    4. Technical and fundamental analysis
    5. Stock market indices
  13. Foreign exchange markets
    1. Learning objectives
    2. Basic considerations
    3. Purchasing power parity
    4. Interest rate parity
    5. Exchange market interventions
    6. Exchange rate regimes
    7. ERM II
  14. Derivative markets
    1. Learning objectives
    2. Basic considerations
    3. Forward and futures contracts
    4. Swaps
    5. Options
    6. Credit Default Swaps
  15. Market efficiency
    1. Learning objectives
    2. Forms of efficiency
    3. Behavioural finance
  16. Money supply and money demand
    1. Learning objectives
    2. Monetary aggregates
    3. The money supply process
    4. Money demand
    5. On the control of money supply
    6. The monetary policy transmission process
    7. Time lags of monetary policy
    8. Interest–rate decisions of the ECB
    9. Monetary policy instruments in the euro area
    10. Monetary policy in times of financial crisis
    11. Enhanced credit support
    12. The Securities Market Programme
    13. Three-year longer-term refinancing operations
    14. Outright Monetary Transactions
    15. Forward guidance
    16. TARGET- issues
    17. The way forward
  17. Monetary policy in practice
    1. Learning objectives
    2. Real interest rates
    3. Monetary Condition Indices
    4. The McCallum rule
    5. The Taylor rule
    6. Monetary indicators
  18. Asset price imbalances and monetary policy
    1. Learning objectives
    2. Asset price imbalances
    3. Some historical examples
    4. Detecting asset price booms and busts
    5. Early warning indicator models
    6. Monetary policy, asset and consumer prices
    7. Monetary policy responses
  19. Questions for review
  20. List of symbols and abbreviations
  21. Glossary
  22. References
  23. Endnotes

About the Author

Professor Dr. Dieter Gerdesmeier is a staff member in the Directorate General Economics of the European Central Bank and currently acts as Secretary of the Monetary Policy Committee of the ECB. Besides his regular tasks, Dieter has been teaching at various universities, lecturing mostly monetary, macroeconomics and financial economics. His main research areas are monetary theory and policy as well as international financial markets.

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