comment rendre la poltique gb

The Chief Economist Paris, 10 February 2003 Patrick ARTUS Tél : 01.40.49.50.60 Fax : 01.40.49.78.18 email : partus@cdcixis-cm.com HOW CAN THE COUNTER-CYCLICAL NATURE OF THE EURO ZONE’S MONETARY POLICY BE LESSENED, COUNTRY BY COUNTRY, AND THE NUMBER OF ITS INTRUMENTS INCREASED? (Patrick Artus) (Paper prepared for the 20th Symposium on Banking and Monetary Economics in Birmingham on 5 & 6 June 2003) 56, rue de Lille - pièce 3053 - 75356 Paris 07 SP -2- INTRODUCTION We will show that the euro zone is heterogeneous from the point of view of the economic situation of countries and the transmission channels of monetary policy. This implies that, country by country, monetary policy can often be pro-cyclical; it cannot react to local situations and might even increase heterogeneity. The changeover to the new solvency ratios of Basle 2 is bound to worsen this situation. We propose increasing the number of instruments in monetary policy, for example by giving each national central bank the possibility of changing statutory reserves on certain items in banks’ balance sheets; and also modulate the solvency capital ratios according to the cycle. We will illustrate these proposals with two simple theoretical models. JEL Classification: E 53, E 58, G 28. -3- 1 – Heterogeneity of the euro zone and number of instruments in monetary policy 1 – 1 ...