The Monetary Pillar and the Great Financial Crisis

• Authors: Jordi Galí.
• BSE Working Paper: 109965 | September 15
• Keywords: monetary policy strategy , two pillar strategy , monetarism , financial stability
• JEL codes: E52, E58
• monetary policy strategy
• two pillar strategy
• monetarism
• financial stability

Since its inception, a most distinctive (and controversial) feature of the ECB monetary policy strategy has been its emphasis on money and monetary analysis, which constitute the basis of the so-called monetary pillar. The present paper examines the performance of the monetary pillar around the recent financial crisis episode, and discusses its prospects in light of the renewed emphasis on financial stability and the need for enhanced macro-prudential policies.