Asymmetries in the Euro area economies: Obstacle for European Central Bank efficiency?

Geralynn Batista, Fordham University


Both the successes and failures of the European Central Bank (ECB) will affect not only members of the euro zone, but also the global economy in general. While the creation of the ECB and the euro has brought greater prosperity to the euro area economies, its long-term efficiency and stability will depend on the efficacy of the ECB in addressing some critical obstacles to its success. This paper evaluates the efficiency of the European Central Bank in maintaining an unbiased monetary policy with a goal of price stability, and assesses the reaction of the national economies to economic shocks. To do so, it tests the efficiency of the monetary policy tool used by the ECB and evaluates its national transmission. Specifically, four questions are posed and resolved. First, has the implementation of a common monetary policy significantly changed the monetary policy previously in practice? Second, are the member countries adhering to the policy guidelines of the ECB, and are they better off? Third, are the costs and benefits of the common monetary equally distributed to all euro area economies? That is, is the ECB biased? And fourth, are the national economies synchronized enough to thwart any potential asymmetric shocks from rendering the ECB policy inefficient.

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Recommended Citation

Batista, Geralynn, "Asymmetries in the Euro area economies: Obstacle for European Central Bank efficiency?" (2004). ETD Collection for Fordham University. AAI3116860.