Question

please write a paragraph for each with references 0 plagerism

1. Discuss how the monetary policy of the European Central Bank is similar to the U.S. How are they different?

2. Describe an asset-price bubble. Should Central Banks Respond to Asset-Price Bubbles?

Answer 1

1) The monetary policy of the European Central Bank is similar to US Federal reserve in regards that both these banks have followed an ultra loose policy to support credit growth and support economic growth. They are different in the sense that both these banks might have different inflation targeting framework. Also since the monetary union of Europe is different than the US, both these banks have slightly different targets and different ability with regards to policy rates to achieve the same objective.

Ref: Belke, A., & Gros, D. (2005). Asymmetries in Transatlantic Monetary Policy‐making: Does the ECB Follow the Fed?. JCMS: Journal of Common Market Studies, 43(5), 921-946.

An asst price bubble is the housing price bubble which was seen in the US housing market around 2008.The central bank has the responsibility to ensure that runway inflation is contained and economic stability is maintained. To prevent and curtail runway asset prices, the central bank should raise policy rates to reduce the demand and hence asset inflation.