Европейская денежная система
Информация - Экономика
Другие материалы по предмету Экономика
critique phenomenon is the impact of current, very low rates of inflation on private behaviour. For many countries participating in Monetary Union, there is simply no - or only very recent - experience of how the private sector will behave in an environment of sustained and credible low inflation. Instability in past relationships may result, should behaviour change in this new, low inflation environment. I have already argued that these structural changes will benefit Europes citizens - price stability will allow markets to work more efficiently, thereby raising growth, and improving employment prospects. But these changes may also complicate the ESCBs assessment of economic and financial conditions.
These uncertainties - arising directly from the transition to Stage Three itself - are both compounded by, and inter-related with, the broader economic context in which Monetary Union will be established. The increasing internationalisation of the global economy, and the current rapid pace of technological change, have affected all sectors of the economy, and the banking and financial systems in particular. For example, at present there are many, inter-related innovations in the payments system, such as:
* the introduction of TARGET (directly related to EMU itself);
* greater technological sophistication of payments mechanisms,
as use of computers and information technology becomes more
widespread and advanced;
* the additional incentive for cash-less payments that may
arise from the fact that for some time to come -
approximately three years - the new euro-denominated notes
and coin will not come into circulation. In particular,
narrow monetary aggregates might be affected by this
development; and,
* increased competition among banks and settlements systems,
arising from globalisation and the breakdown of barriers
between previously segmented national markets, which may
drive down the margins and fees charged to customers.
At the ESCB we will need to keep abreast of these developments, both for their immediate impact on one of our "basic tasks" - promoting the smooth operation of the payments system - and because of their broader implications for the euro area economy. Reducing transactions costs in the way I just described will benefit European consumers and producers - but it may also change the indicator properties of monetary, financial and economic variables that national central banks have looked to as guides for monetary policy in the past.
Finally, in Monetary Union there will be some heterogeneity across countries within the euro area. Europes diversity is one of its greatest assets. But this diversity is greater than is typically the case between different regions in the same country using a single currency. Nevertheless, the ECB Governing Council will have to concentrate on monetary and economic developments in the euro area as a whole when discussing and taking monetary policy decisions.
How should a monetary policy strategy be selected in this - for monetary policy makers, at least - potentially difficult environment? The EMI outlined a number of guiding principles for the selection of a monetary strategy by the ESCB. Foremost amongst these was the principle of effectiveness. The best monetary policy strategy for the ESCB is the one which best signals a credible and realistic commitment to, and ensures achievement of, the primary objective of price stability.
For many commentators, this criterion points unambiguously in the direction of so-called direct inflation targeting. If monetary strategies are to be judged according to how well they achieve price stability, defined as a low rate of measured inflation, then advocates of inflation targets argue an optimal strategy would surely target this low inflation rate directly. These commentators would place explicit quantitative targets for inflation itself at the centre of the ESCBs monetary policy strategy. Their approach has been strongly endorsed in some academic and central banking circles.
But, in the current circumstances, a pure direct inflation targeting strategy is too simplistic for the ESCB, and possibly even mis-conceived. The ESCB well understands the primacy of price developments and price stability for monetary policy making. Indeed, the Treatys mandate is unambiguous in this respect. We will signal our intentions on this dimension very clearly by making a transparent public announcement of our definition of price stability. The current low level of long-term nominal interest rates in the euro area suggests that the financial markets, at least, understand and believe the over-riding priority that we attach to achieving price stability.
Regarding strategy, our choice therefore need not be governed solely by a desire to signal our intent to maintain price stability. This has already been well-established - by the Treaty, and by the success of the convergence process in reducing inflation in Europe to its current low level. Rather than signalling our intent, the strategy must constitute a practical guide that ensures monetary policy is effective in achieving the goal we have been set.
In this respect, there are considerable problems with using inflation itself as the direct target within the ESCBs overall strategy. Because of the well-known lags in the transmission mechanism of monetary policy to the economy in general, and the price level in particular, it is impossible for a central bank to control inflation directly. Therefore, inflation targeting in practice means inflation forecast targeting where central banks set monetary policy to keep their best forecast of inflation at the target level deemed consistent with price stability.
But recognition of this need for forecasts in an inflation targeting strategy immediately raises practical difficulties. In the uncertain environment likely to exist at the outset of Monetary Union, forecasting inflation will be very difficult, not least for the conceptual, empirical and practical reasons I outlined a moment ago. Forecasting models estimated using historic data may not offer a reliable guide to the behaviour of the euro area economy under Monetary Union. Forecast uncertainty is likely to be relatively large, possibly rendering the whole inflation targeting strategy ineffective.
To address these uncertainties, a large element of judgement would have to be introduced into the forecasting process, in order to allow for the regime shifts and structural and institutional changes that are a seemingly inevitable consequence of EMU. Simply relying on historic relationships to forecast future developments is unlikely to prove accurate or effective. While introducing judgmental adjustments into forecasts in these circumstances would be both appropriate and necessary, such adjustments are likely to compromise the transparency of the inflation forecasts and, thus, of any inflation targeting strategy. Using judgement may prevent outside observers from readily assessing the reliability and robustness of the inflation forecasting procedures used by the ESCB.
I see a distinct bias in the academic discussion of the comparative advantages of inflation targeting and monetary targeting. With good reason, many arguments are presented against the ESCB adopting a monetary target. But proponents of inflation targeting seem to forget that, in the current context, most of these arguments could also be used against inflation targeting. Above all, I have not seen any attempt thus far - even if only a tentative one - to explain how the ESCB should deal with the specific difficulties involved in making an inflation forecast at the outset of Monetary Union that could be used as the centrepiece of an inflation targeting strategy.
In many respects, a strategy giving a prominent role to monetary aggregates has considerable advantages over direct inflation targeting. Monetary aggregates are published. They are clearly not subject to various kinds of judgmental manipulation by policy makers or central bank staff that might be possible with inflation forecasts. To the extent that policy makers wish to depart from the signals offered by monetary growth because of special factors or distortions to the data - including those distortions arising from the transition to Monetary Union itself - they will have to do so in a public, clear and transparent manner.
Moreover, a strategy that assigns a prominent role to the monetary aggregates emphasises the responsibility of the ESCB for the monetary impulses to inflation, which a central bank can control more readily than inflation itself. These monetary impulses are the most important determinants of inflation in the medium term, while various other factors, such as terms of trade or indirect tax shocks, may influence the price level over shorter horizons.
In the light of these considerations, it was agreed at the EMI that, regardless of the final choice of the monetary policy strategy, monetary aggregates would be accorded a prominent role in the overall monetary framework adopted by the ESCB.
However, the EMI also noted that certain technical pre-conditions would have to be met before this prominent role could be translated into an explicit, publicly announced monetary target, guideline, benchmark or monitoring range. Specifically, such targets or ranges would only be meaningful guides to monetary policy if the relationship between money and prices - as encapsulated in a demand for money equation - was expected to remain sufficiently stable.