The Eurosystem's Operational Framework in the Context of the ECB's Monetary Policy Strategy

Abstract

This paper discusses the implications of the European Central Bank's monetary policy strategy for the Eurosystem's operational framework, in the context of the transmission mechanism of monetary policy in the euro area. The first part of the paper uses an analytical framework common to many recent analyses of monetary policy to distinguish the operational and strategic elements of monetary policy making. The second part of the paper describes and discusses the choices made by the ECB and the Eurosystem with regard to monetary policy strategy and operational framework. In this respect, the paper highlights that the design of both these aspects of the single monetary policy reflect, in large part, the need for policy makers to retain flexibility in the face of an uncertain environment.