chapter  7
14 Pages

Sustaining price stability

In the last two chapters we have emphasised the importance of authorities’ relative preference for output and price stability reflected in the policy coefficient A. Knowing the relative importance given to these policy objectives is crucial to the assessment of net benefits which derive from belonging to the monetary union to its members. In this chapter we will look at the commitment to price stability by European authorities from different angles in order to get a clearer view of the relative weight given to these policy objectives. We will first look at the concept of price stability then at possible inflationary biases in monetary policy objectives and finally, at the European policy frame.