A Study of European Financial Integration and Monetary Policy Options
Chapter 8: Money Market Development and Monetary Policy Options: Concluding Remarks
In this book we have analyzed the interplay between money market development, international money market integration and monetary policy options. Our study objects have been 11 small, open European economies, of which seven are, in 2003, members of the EMU, two are members of the EU but not of the EMU, and two stand outside the EU altogether. Among other things, this composition of countries has enabled us to study the relationship between institutional monetary integration and (domestic) money market structure, as well as between institutionalized international integration and ‘market led’ financial integration in general. The motivation for our study was, broadly speaking, to study the relationship between financial market development/transformation and economic policy choices. We chose to focus on the relationship between money market development and monetary policy choices, with the motivation that the implementation, as well as the underlying ‘philosophy’, of monetary policy have undergone radical changes in most European (and other industrial) countries during the last few decades. These changes have been paralleled by a similar radical development of financial markets – including money markets, which are the main ‘forum’ for the implementation of monetary policy. We argued that these parallel processes are intertwined, and have domestic (political) roots, as well as being greatly influenced by increased cross-border capital mobility. The idea of the development process as a continuous interplay of market outcomes and policy choices is a fundamental underlying hypothesis of the whole study. In the first part of this study, we focused on the domestic dimension...
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