Two seemingly unconnected empirical results suggest an intriguing mechanism. First, economic integration helps harmonize prices internationally, with trade being the primary channel (Rogoff 1996, Goldberg and Knetter 1997). Second, monetary union may greatly increase the amount of trade among...

Traditional Taylor rules, which are estimated using a level specification linking the short-term interest rate to inflation and the output gap, are unstable when estimated on euro area data and forecast poorly out of sample. We present an alternative reaction function which takes the...

This paper provides a simple weekly model of the regular supply of liquidity in the euro area, with a view to understanding the functioning of the euro area money market. The main result of the analysis is that liquidity has normally been provided by the ECB in a neutral and smooth manner, but...

On several occasions during the period 2001-2003, the European Central Bank (ECB) decided to deviate from its "neutral" benchmark allotment rule, with the effect of not alleviating a temporary liquidity shortage in the banking system. This is remarkable because it implied the possibility of...

This paper uses data on German government bond futures options to examine the behaviour of market expectations around monetary policy actions of the European Central Bank (ECB). In particular, this paper focuses on the asymmetries in bond market expectations, as measured by the skewness of...

Inflation expectations constitute a subject of particular contemporary interest to central banks, especially those pursuing a monetary policy based on a strategy of direct inflation targeting. Macroeconomic theory indicates that the transmission of monetary policy impulses and their impact on...

On 1 May 2004, ten countries became members of the European Union. The addition of Cyprus, the Czech and Slovak Republics, Estonia, Hungary, Latvia, Lithuania, Malta, Poland and Slovenia brings the total number of Member States to 25. Although the EU has successfully integrated new countries on...

The ECB has an obligation to provide statistical information of the highest quality to the public and this third edition of the publication u0093Bond markets and long-term interest rates in non-euro area Member States of the European Union and in accession countriesu0094 serves to contribute to...

Enlargement will provide major impulses for economic integration and new possibilities for the division of labour in the enlarged EU will offer additional opportunities for growth. At the same time, ensuring a more or less uniform regulatory framework in a single market comprising 25 or more...

The paper studies the incentives to join a monetary union, and the incentives to reform within a monetary union and within the candidate countries, respectively. It presents some "orders of magnitude" evidence on the size and balance of the incentive effects for joining and being a member, and...