Monetary Policy

Monetary Policy of the ESCB: Strategic and Implementation Issues
Sponsored by
Banca dItalia
IGIER
Centro "Paolo Baffi" (Università Bocconi)

Venue
Foyer dellAula Magna
UNIVERSITA BOCCONI
Via Sarfatti, 25, Milano

Monday July 6 - Tuesday July 7 1998

The objective of the workshop is to discuss relevant issues concerning strategy, goals and targets of the ECB. The contributions analyze both empirical and theoretical aspects of the single monetary policy in the face of asymmetries in the transmission mechanism and compare alternative policy rules and frameworks.

Monday July 6, morning
Chair: R. Rovelli (University of Bologna)

9.15-10.15
"The Role of a Regional Bank in a System of Central Banks"
The paper analyzes the experience of policy making in a Federal Reserve Bank within the Federal Reserve System. The determinants of the balance between regional and central interests, essential for the success of a system of central banks that serves a continental-sized economy, are discussed.
M. Goodfriend ( FRB of Richmond)

discussant: J-J. Rey (National Bank of Belgium)

Coffee Break

10.30-11.30
"Structural Asymmetries and the Optimal Monetary Policy Instrument of the ECB"
The implications of differences in economic structure across European countries for the conduct of the single monetary policy provide the focus of this paper. This issue is analyzed by means of a two-country model with asymmetric structural equations and a general formulation for monetary policy.
C. Monticelli (Bank of Italy)

discussant: D. Gros (CEPS)

11.30-12.30
"Monetary Policy, Wage-Setting Structures and Asymmetries in the EMU"
This paper investigates the repercussions to monetary policy and wage-setting of the establishment of a monetary union in the presence of unionized labor markets with different structural features.
A. Cukierman and F. Lippi ( Tel Aviv University and Bank of Italy)

discussant: A. Sibert (Birkbeck College)

Lunch

Monday July 6, afternoon
Chair: I. Angeloni (Banca dItalia)

14.00-15.00
"The ECB and the Stability of the Financial System"
The bearings of key features of the ECB operating procedures - fully collateralised intraday credit, relatively infrequent intervention, the lack of independent supervisory authority and ambiguous responsibility for lender-of-last-resort role - on the prospects and the functioning of EMU-wide financial markets are discussed.
A. Prati and G. Schinasi (IMF)

discussant: L. Bini-Smaghi ( European Central Bank)

Coffee Break

15.15-17.15
"Will EMU Generate Asymmetry? Comparing Monetary Policy Transmission Across European Countries"
M. Ehrmann (EUI)

"Difference in Monetary Policy Transmission: Evaluating the Evidence"
M. Kieler and T. Saarenheimo (EC Commission)

"Monetary Transmission and Controllability of Money in Europe: A Structural VEC Approach"
P. Vlaar (De Nederlandsche Bank ) and H. Schuberth (esterreichissche Nationalbank )

The papers in this session provide evidence on the importance of cross-country differences in the transmission mechanism of monetary policy in Europe, applying S-VAR methodology, extended to include cointegration analysis.

Discussant: C. Favero (Bocconi University)

17.30-18.30
Book Presentation:
"Monetary Policy and Interest Rates" edited by I. Angeloni and R. Rovelli

Chair: A. Porta (Bocconi University)

discussants: C. Goodhart (LSE, Bank of England); L. Spaventa ( University of Rome La Sapienza); I. Visco (OECD).

Tuesday July 7, morning
Chair: Richard Clarida (Columbia University)

9.15-11.15
"The Taylor Rule: a Useful Monetary Policy Guide for the ECB?"
The authors explore the usefulness of the Taylor rule as a benchmark for policy decisions in the EMU, building on empirical evidence about the Bundesbank and analyzing the stabilization properties of the rule in a simple structural model of the German economy.
G. Peersman and F. Smets (University of Ghent, BIS )

discussant: S. Dhar (Bank of England)

"Policymakers Revealed Preferences and the Output-Inflation Tradeoff"
Estimates of the output-inflation tradeoff for a number of OECD countries are used to infer the relative weight of output and inflation in the implied objective function of the policymaker. This methodology is applied to the investigation of several policy issues, such as the impact of model uncertainty and the optimal speed of response to shocks. S. Cecchetti, M. Mc. Connel and G. Perez-Quiros (FRB of New York)

discussant: K.H. Toedter (Deutsche Bundesbank)

Coffee Break

11.30-12.30
"From the ERM to the Euro; A Soft Transition?"
The authors provide some new empirical evidence relevant for two EMU issues. First, output and inflation correlations across countries are examined, to verify the fulfillment of OCA conditions. Second, the convergence of monetary policy rules in the major EU countries is tested.
I. Angeloni and L. Dedola (Bank of Italy)

discussant: K. Kuttner (FRB of New York)

Lunch

Tuesday July 7, afternoon
Chair: G. Tabellini (Bocconi University)

14.00-16.00
"The ECB and Inflation Targeting"
The paper discusses the background to the ECBs choice of monetary strategy and goes on to consider in some detail the implications of an inflation targeting strategy in EMU.
M. Artis and Z. Kontolemis (EUI and IMF)

discussant: S. Cecchetti (FRB of New York)

"Does Talk Matter After All? Identifying the Effects of Inflation Targeting"
The main purpose of the paper is to determine whether the institutional efforts at accountability and transparency embodied in inflation targeting actually matter, or whether they simply are indicators of a preference shift to stronger counter-inflationary policies. K. Kuttner and A. Posen (FRB of New York and Institute for International Economics)

discussant: R. Rovelli (University of Bologna)

Coffee Break

16.30-18.00
Round table: "Watching the ECB Policy"

Chair: G. Basevi (University of Bologna)

Panelists: M. Goodfriend (FRB of Richmond), C. Goodhart (LSE, Bank of England), R. Knig (Deutsche Bundesbank).

Discussants: J.L. Alzola (Salomon-Smith Barney), L. Codogno ( Bank of America), B. Kasman (J.P. Morgan)

Organizing Committee:
Ignazio Angeloni, Head of Monetary Sector, Research Department, Banca dItalia. Luca Dedola, Economist, Research Department, Banca dItalia. Carlo Favero, Associate Professor, Bocconi University. Francesco Lippi, Economist, Research Department, Banca dItalia. Riccardo Rovelli, Professor, University of Bologna.

Secretarial assistance:
Stefania Pisoni tel. 0039-02-5836.5306 fax. 0039-02-5836.5343
email: stefania.pisoni@uni-bocconi.it