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Are some EMU members more favoured by the ECB’s interest rate decisions than others?

Byström-Hjalmarsson, Linnéa (2009)
Department of Economics
Abstract
The ECB has the ultimate responsibility for the single monetary policy. The ECB’s goal is maintaining price stability over the medium term; this means ensuring inflation stays in the region of 2 percent. If some EMU members are more favoured by the ECB’s interest rate decisions then this would cause implicit problems and overall, the monetary union would face problems regarding structural divergences between member countries. These divergent problems would make each country differ from each other with regard to inflation and GDP growth. Thus the ECB has the difficult task of deciding a single interest rate that fits all member countries. Calculations based on interest rates versus forecasts on output gaps and inflation do illustrate a... (More)
The ECB has the ultimate responsibility for the single monetary policy. The ECB’s goal is maintaining price stability over the medium term; this means ensuring inflation stays in the region of 2 percent. If some EMU members are more favoured by the ECB’s interest rate decisions then this would cause implicit problems and overall, the monetary union would face problems regarding structural divergences between member countries. These divergent problems would make each country differ from each other with regard to inflation and GDP growth. Thus the ECB has the difficult task of deciding a single interest rate that fits all member countries. Calculations based on interest rates versus forecasts on output gaps and inflation do illustrate a pattern that shows that some countries are more favoured by interest rate decisions than others. This poses a crucial question as to whether all countries benefit from membership in the monetary union and, by extrapolation, does the ECB as an institution have enough power to execute pivotal monetary politics? (Less)
Please use this url to cite or link to this publication:
author
Byström-Hjalmarsson, Linnéa
supervisor
organization
year
type
M2 - Bachelor Degree
subject
keywords
EMU, inflation, interest rate, monetary policy, ECB, Eurozone, output gap, Economics, econometrics, economic theory, economic systems, economic policy, Nationalekonomi, ekonometri, ekonomisk teori, ekonomiska system, ekonomisk politik
language
English
id
1509439
date added to LUP
2009-10-29 00:00:00
date last changed
2010-08-03 10:52:58
@misc{1509439,
  abstract     = {{The ECB has the ultimate responsibility for the single monetary policy. The ECB’s goal is maintaining price stability over the medium term; this means ensuring inflation stays in the region of 2 percent. If some EMU members are more favoured by the ECB’s interest rate decisions then this would cause implicit problems and overall, the monetary union would face problems regarding structural divergences between member countries. These divergent problems would make each country differ from each other with regard to inflation and GDP growth. Thus the ECB has the difficult task of deciding a single interest rate that fits all member countries. Calculations based on interest rates versus forecasts on output gaps and inflation do illustrate a pattern that shows that some countries are more favoured by interest rate decisions than others. This poses a crucial question as to whether all countries benefit from membership in the monetary union and, by extrapolation, does the ECB as an institution have enough power to execute pivotal monetary politics?}},
  author       = {{Byström-Hjalmarsson, Linnéa}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Are some EMU members more favoured by the ECB’s interest rate decisions than others?}},
  year         = {{2009}},
}