Comment on “Lessons for Monetary Policy from the Euro-Area Crisis” |
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Affiliation: | 1. University of Zurich, 203, Rämistr. 66, CH-8006 Zürich, Switzerland;2. Brunel University London, Uxbridge UB8 3PH, United Kingdom;3. European Central Bank, Kasiserstr. 29, D-60311 Frankfurt, Germany |
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Abstract: | This comment discusses and extends the paper: “Lessons for Monetary Policy from the Euro Area Crisis,” by Charles Goodhart. The comment claims the Eurosystem was more sluggish in responding to the crisis than the Federal Reserve due to restrictions originating from its mandate. Yet today’s challenge runs deeper, as the absence of a banking union in the Euro Area has allowed a large fragmentation in financial intermediation. The critical question is: “Given that the Euro Area is not an Optimum Currency Area and a banking union will take a long time to materialize, can the Eurosystem find a way to alleviate the fragmentation in lending rates without compromising its independence?” The comment offers a solution, which would expand the monetary toolbox. |
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Keywords: | EMU Fragmentation Banking union Securitized market |
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