Monetary policy with transitory vs. permanently low growth

29-11-2018

The recent economic slowdown in the euro area depends on supply-side and demand-side factors with different conse-quences on potential output. On the one hand, it may grow at a low pace for a long time; on the other hand, it may soon grow a bit faster. The ECB strategy has to adapt to these different possible outcomes. Anyway, we argue that the ECB has rooms for manoeuvre whatever the trend in output. This document was provided by Policy Department A at the request of the Committee on Economic and Monetary Affairs.

The recent economic slowdown in the euro area depends on supply-side and demand-side factors with different conse-quences on potential output. On the one hand, it may grow at a low pace for a long time; on the other hand, it may soon grow a bit faster. The ECB strategy has to adapt to these different possible outcomes. Anyway, we argue that the ECB has rooms for manoeuvre whatever the trend in output. This document was provided by Policy Department A at the request of the Committee on Economic and Monetary Affairs.

Externý autor

Christophe BLOT, Jérôme CREEL and Paul HUBERT