chapter  11
29 Pages

Money and the macroeconomy

The European Central Bank (ECB) has become as much a focus of world financial markets as the Federal Reserve. The ECB represents the extent to which the European Union (EU) has evolved politically to date, the frontier of monetary unions in practice. The interplay between the ECB and the EU member countries is difficult to surmise; thousands of pages of research have tried to explain these connections. What may have kept countries such as the United Kingdom, Switzerland, and Sweden out of the monetary union was a loss of control over central banking, an inability to individually confront domestic economic problems through monetary policy. While each European Currency Union country retains its individual fiscal policy measures, monetary policy has been centralized. For countries wishing to retain policy freedom, the choice of joining this economic bloc is a difficult one. Money, and monetary policy, is now the centerpiece of world economic policy. It speaks and all stand up.