Edited by Erdem Başçı, Sübidey Togan and Jürgen von Hagen
Hakan Berument I read the chapter, and enjoyed it very much as it was a great learning experience for me. This chapter looks at the eﬀects of the monetary policy setting in the euro area and how this aﬀects Turkey. The chapter has three parts. The ﬁrst part suggests the optimum monetary policy strategy setting that the central banks should adopt and compares this with European Central Bank practices. The second part examines the transmission mechanism of monetary policy in the euro area to the new member countries. The third part discusses the inﬂuence of European Central Bank practices on Turkey. Since the conference is on the possible eﬀect of the EU membership of Turkey on economic outcomes, my comments will focus on the third part. The authors present Turkey’s membership as a threat to price stability due to the diﬀerent inﬂation dynamics of each country and heterogeneities in the transmission. It is true that various shocks (including money supply and supply side shocks) aﬀect economic performances diﬀerently across countries. For example, increased input prices may beneﬁt some countries and hurt others. Even if the input price increase (say oil) accelerates inﬂation for all the countries in the euro area, this increase may be more immediate and shorter in duration in some countries but more persistent elsewhere. Here, I would like to elaborate on the issue of tight monetary policy in the euro area. Due to the depth of ﬁnancial...
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