The Monetary Transmission Process
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The Monetary Transmission Process Recent Developments and Lessons for Europe Edited by The Deutsche Bundesbank
Editorial matter and selection Deutsche Bundesbank 2001 Chapters 1 8 (and Comments/s) Palgrave Publishers Ltd 2001 Softcover reprint of the hardcover 1st edition 2001 978-1-349-41563-2 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London W1P 0LP. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The authors have asserted their rights to be identified as the authors of this work in accordance with the Copyright, Designs and Patents Act 1988. First published 2001 by PALGRAVE Houndmills, Basingstoke, Hampshire RG21 6XS and 175 Fifth Avenue, New York, N. Y. 10010 Companies and representatives throughout the world PALGRAVE is the new global academic imprint of St. Martin s Press LLC Scholarly and Reference Division and Palgrave Publishers Ltd (formerly Macmillan Press Ltd). ISBN 978-1-349-41563-2 ISBN 978-0-230-59599-6 (ebook) DOI 10.1057/9780230595996 This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. A catalogue record for this book is available from the British Library. Library of Congress Cataloging-in-Publication Data The monetary transmission process : recent developments and lessons for Europe / edited by The Deutsche Bundesbank. p. cm. Includes bibliographical references and index. 1. Monetary policy Europe. 2. Finance Europe. I. Deutsche Bundesbank. HG925.M6646 2000 332.4'94 dc21 00 042080 10 9 8 7 6 5 4 3 2 1 10 09 08 07 06 05 04 03 02 01
Contents Notes on the Contributors Introduction Heinz Herrmann 1 1 Analysis of the Monetary Transmission Mechanism: Methodological Issues Bennett T. McCallum 11 Lawrence J. Christiano 44 Harald Uhlig 51 2 Price Stability as a Target for Monetary Policy: De ning and Maintaining Price Stability Lars E. O. Svensson 60 Mervyn King 103 Jose Vi ~nals 107 3 The Transmission Process Allan H. Meltzer 112 4 Asymmetric Interest Rate Policy in Europe: Causes and Consequences Axel A. Weber 131 Carlo A. Favero 159 Philippe Moutot 164 5 Legal Structure, Financial Structure and the Monetary Policy Transmission Mechanism Stephen G. Cecchetti 170 Manfred J. M. Neumann 195 vii v
vi Contents Ignazio Angeloni 201 6 Differences Between Financial Systems in European Countries: Consequences for EMU Reinhard H. Schmidt 208 Charles A. E. Goodhart 241 Comment Alain Vienney 247 7 European Labour Markets and the Euro: How Much Flexibility Do We Really Need? Michael C. Burda 252 Comment Hendrik J. Brouwer 276 Comment LuõÂs Campos e Cunha 279 8 The Monetary Transmission Process: Concluding Remarks Otmar Issing 283 Francesco Giavazzi 294 Claes Berg 298 Ignazio Visco 303 Manfred J. M. Neumann 311 Name Index 315 Subject Index 319
Notes on the Contributors lgnazio Angeloni, European Central Bank Claes Berg, Sveriges Riksbank Hendrik J. Brouwer, De Nederlandsche Bank NV Michael C. Burda, Humboldt University, Berlin LuõÂs Campos e Cunha, Banco de Portugal Stephen G. Cecchetti, Federal Reserve Bank of New York Lawrence J. Christiano, Northwestern University Carlo A. Favero, Bocconi University Francesco Giavazzi, Bocconi University Charles A. E. Goodhart, London School of Economics and Political Science Heinz Herrmann, Deutsche Bundesbank Otmar Issing, European Central Bank Mervyn King, Bank of England Bennett T. McCalIum, Carnegie Mellon University Allan H. Meltzer, Carnegie Mellon University Philippe Moutot, European Central Bank Manfred J. M. Neumann, University of Bonn Reinhard H. Schmidt, Johann Wolfgang Goethe University, Frankfurt Lars E. O. Svensson, Stockholm University Harald Uhlig, Tilburg University Alain Vienney, Banque de France Jose Vinals, ~ Banco de Espana lgnazio Visco, Organisation for Economic Cooperation and Development Axel A. Weber, Johann Wolfgang Goethe University, Frankfurt vii