Chapter 10 Essay questions

Monetary policy in the Eurozone
  1. Why is it that despite the privileged role the ECB gives to the growth rate of money (M3), this variable has been disregarded most of the time by the ECB?
  2. Could the growth rate of M3 be used as a warning signal of future financial crisis?
  3. Is inflation always and everywhere a monetary phenomenon?
  4. How can the ECB set up a system that will warn of future financial crises?
  5. What is the difference between explicit inflation targeting and the ECB’s ‘two-pillar strategy’? Could explicit inflation targeting be a good alternative to the two-pillar strategy of the ECB?
  6. How would you define a new ‘two-pillar’ strategy for the ECB that takes into account the objective of price stability?
  7. What is the difference between tender procedures with variable and fixed rates? Why did the ECB switch from fixed-rate tenders to variable-rate tenders until the start of the financial crisis?
  8. Why did the ECB return to fixed rate tenders since the start of the financial crisis?
  9. How did the ECB deal with potential transfers of risks between countries that resulted from its QE programme?
  10. Has the ECB transgressed its statutes by engaging in large-scale purchases of government bonds?
  11. How effective has the ECB’s ‘quantitative easing’ been in stimulating output and raising inflation?
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