The First Year of the Eurosystem: Inflation Targeting or Not?
Lars E.O. Svensson
Princeton University, CEPR and NBER
American Economic Review: Papers and Proceedings 90, May 2000, 95-99
This paper is a brief evaluation of the Eurosystem’s monetary-policy regime after its first year, in particular of the extent to which it is similar to inflation targeting as practiced by an increasing number of central banks. I examine the Eurosystem’s goals, framework for monetary-policy decisions and communication with outsiders. Criteria for evaluation are whether the goals are unambiguous and appropriate; whether the decision framework is efficient in collecting and processing information and reaching decisions that are appropriate relative to the goals; and whether the communication is effective in motivating decisions, simplifying external evaluation and thereby improving transparency and accountability. I also consider whether the actual instrument setting has been appropriate, given the information available at the times of decision.
JEL Classification: E42, E52, E58
Keywords: Monetary targeting, ECB, transparency