Европейская денежная система
Информация - Экономика
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While periodic and transitory falls in the price level may be normal, and should not give rise to major concerns, a prolonged deflation is clearly inconsistent with any meaningful definition of price stability. Moreover, since nominal interest rates cannot fall below zero, a prolonged deflation may render the interest rate policy of the central bank rather ineffective. What remains is out-right purchases of assets - both foreign and domestic.
wordsly, the ESCB cannot ignore the implications of nominal rigidities in wages and prices for the transmission mechanism of monetary policy. If we were to live long enough under a regime of stable prices, I would not exclude the possibility that wage and price setting behaviour would adapt, and nominal rigidities would finally disappear. This would reduce some of the potential output costs of fighting inflation, and thus increase the net long-run benefits of price stability. However, for the time being we may have to live with these rigidities and take their effects into account when deciding on our monetary policy strategy.
In this respect, the present situation is not easy for the ESCB. Unemployment in the euro area is currently very high.
However, in contrast to these persistently high levels of unemployment - which are largely structural in origin - the prospects for maintaining price stability are currently very encouraging. Inflation expectations and long-term interest rates in the euro area are at close to historical lows. Actual area-wide inflation is also very subdued.
The current low headline rate of inflation has been moderated somewhat by recent falls in oil and commodity prices, themselves stemming, in part, from the economic and financial crises in Asia and, more recently, in Russia. However, this effect on inflation has been largely off-set by the impact of indirect tax rises in a number of participating countries, which have raised consumer prices for certain goods. All in all, the changed external environment contributes to an overall outlook of very subdued inflationary pressures.
In defining price stability, one might ideally refer to a conceptual measure of core inflation that tries to isolate monetary effects on the price level - for which the ESCB is properly responsible - from such terms of trade or indirect tax shocks, over which it has little immediate control.
In our month-to-month communication with the public, core measures of inflation may prove useful. But, in its preparatory work for Monetary Union, the EMI recognised that any sensible definition of price stability for the euro area would have to be based on a comprehensive and harmonised price measure. Core measures of inflation typically exclude some items. They are unlikely to be comprehensive enough to satisfy the requirements of an index suitable for a sensible public definition. These considerations point to using the headline measure of the harmonised index of consumer prices (or HICP) for the euro area in the definition of price stability.
Finally, the ESCB needs to build on the success of its constituent national central banks (NCBs) in reducing inflation and achieving price stability during the convergence process in Stage Two of EMU. Given the current generally benign inflation outlook in the euro area that is the product of these accomplishments, there is an understandable desire to lock-in the current success in achieving price stability as well as the apparent credibility of monetary policy, and ensure continuity with existing central bank practice.
3. The importance of the monetary strategy for a successful start of European monetary policy
When price stability is defined using the principles just outlined, how should the ESCB proceed to maintain it? In achieving and maintaining price stability - the primary objective of the Treaty - the choice of monetary policy strategy is vital.
Within the ECB, a considerable amount of work on the monetary policy strategy has already been completed, building to a large extent on the substantial earlier preparatory work of the EMI. A high degree of consensus has been reached among the NCBs and within the ECB about the main outlines of the strategy - I will address some of these areas of agreement in a moment. The final decision has not yet been made. But you should be reassured that progress is being made at a good pace. I have no doubt that we will be in a position to announce the details of the ESCBs monetary policy strategy in good time, prior to the start of Stage Three.
Being a new institution, the European Central bank must be prepared to come under intense scrutiny right from the start. In particular, the international financial markets will monitor its every decision like hawks. Facing this environment in the run-up to Monetary Union, the ESCB must ensure that everything possible is done to make the launch of Stage Three as tension-free as is possible. Choosing and announcing an appropriate monetary strategy is crucial.
The monetary policy strategy is, in the first place, important for the internal decision-making process of the ESCB - how the Governing Council will decide on the appropriate monetary policy stance, given the economic environment. Above all, the ESCB strategy must lead to good - that is to say, timely and forward-looking - monetary policy decisions.
But the strategy is also of the utmost significance in communicating with audiences outside the ESCB. It should stabilise inflation expectations. The more the strategy helps to promote credibility and confidence in the ESCBs monetary policy at the outset of EMU, the more effective that policy will be - and the easier the ESCBs task of maintaining price stability will become.
In deciding upon the appropriate monetary policy strategy, the following aspects must be seen as essential requirements. The strategy must:
* reinforce the ESCBs commitment to price stability, the
primary and over-riding task stipulated by the Treaty;
* it must clearly signal the anti-inflationary objectives of
the ESCB, and serve as a consistent benchmark for the
monetary policy stance; and,
* it must be transparent and explained clearly to the general
public - only then can the strategy serve as a basis for the
ESCBs accountability to the public at large.
The realisation that achievement of an optimal, non-inflationary macroeconomic outcome may founder on the private sectors distrust has been central to the monetary policy debate of the nineteen-eighties and nineties. The search for answers to the questions raised by this debate has spawned an enormous economic literature. The keywords "time inconsistency" and "credibility" draw forth an almost unmanageable flood of publications that have appeared in the wake of the pioneering contributions of Kydland / Prescott and Barro / Gordon.
The need to establish a credible and consistent monetary strategy in the face of the well-known time inconsistency problem faced by policy makers - the dilemma highlighted by this economic literature - is especially important for the ESCB at the outset of Monetary Union. As a brand new institution, the ESCB will have no track record of its own.
Building its reputation, and the associated credibility of monetary policy, is vital. But the process of doing so is complicated by the relatively high level of uncertainty surrounding the transition to Monetary Union itself. The transition to Stage Three is a unique event, and will create unique opportunities for many - but it will also create some unique problems for monetary policy makers. At the ECB, we are addressing these problems and are confident that the risks can be managed successfully. Many of the difficulties we face will be overcome through our own efforts over the coming months.
Among these problems are the difficulties involved in creating a comprehensive and accurate database of euro area-wide statistics. Running a single monetary policy for the euro area requires timely, reliable and accurate euro area data. In some cases, the euro area statistics simply did not exist until quite recently. In others, the statistics are based on new concepts, and the properties of the data series are not yet well known. The long runs of high quality back-data required for empirical economic analysis may be unavailable. Those that do exist are likely to have been constructed using some degree of estimation and judgement, possibly rendering the econometric results produced with them questionable.
Furthermore, the regime shift associated with the adoption of the single monetary policy may change the way expectations are formed in the euro area, and thereby alter forward-looking economic behaviour. Monetary policys effects on consumption, investment, and wage bargaining - and therefore the whole transmission mechanism of monetary policy to developments in the price level - would be among the important economic relationships to be affected in this way.
This may be no bad thing. Indeed, using the regime shift implied by the transition to Stage Three to change both public and private sector behaviour in favourable directions may be one of the largest gains that the euro area can extract from Monetary Union. Nevertheless, these changes are likely to complicate the implementation of certain important elements of a monetary strategy, at least in the short term, as past relationships between macroeconomic variables may break down. What is good for the euro area economy as a whole may create some practical problems for the ESCB.
One example of this so-called Lucas