The case of the ECB: Better to lean against the wind than to fight a hurricane |
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Authors: | Christian Drescher |
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Institution: | (1) Department of Economics, Seoul National University, San 56-1, Sillim-Dong, Gwanak-Gu, Seoul, 151-746, Korea;(2) Asian Development Bank Institute, Kasumigaseki BL 8F, 3-25 Kasumigaseki, Chiyoda-ku Tokyo, 100-6008, Japan |
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Abstract: | In the light of the recent financial crisis, the ECB has announced a slight shift in the reading of its monetary policy strategy
and acknowledges that the case for a “leaning against the wind” strategy has strengthened. This implies that now, more than
ever, the ECB is willing to dampen asset bubbles in the early stage of their formation. This article explains what the ECB
can learn from historical asset bubbles in EU eurozone member countries. The empirical analysis indicates that asset bubbles
in some member countries are mostly followed by asset bubbles in further member countries, which supports the ECB’s current
reading of its monetary policy strategy. |
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Keywords: | |
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