"Fundamentals of Monetary Policy in the Euro Area: Concepts – Markets – Institutions" by Dieter Gerdesmeier

This book attempts to inform the reader in a comprehensive and accessible way about the analytical background and institutional setting of euro area monetary policy. Based on a rigorous description of selected financial markets and their driving forces, the theory and practice of monetary policy are explained in detail and illustrated by a number of up-to-date real world examples.

This book aims at shedding more light at central banks and monetary policy, with a particular focus at the euro area.

Contents
1 Introduction and motivation
2 Basic concepts
2.1 Learning objectives
2.2 Some economic concepts
2.3 Some statistical concepts
3 A short history of EMU
3.1 Learning objectives
3.2 The roadmap to EMU
3.3 Convergence criteria
3.4 The concept of an optimal currency area
3.5 Advantages and disadvantages of a monetary union
3.6 Some controversies about the road
4 Institutions
4.1 Learning objectives
4.2 The European Union
4.3 The European Central Bank
4.4 Presidents of the European Central Bank
4.5 The Rise of the Euro
4.6 A closer look at the U.S. Federal Reserve System
4.7 A closer look at the Bank of Japan
4.8 A closer look at the Bank of England
4.9 Decision-making modalities
4.10 Independence and accountability
5 Inflation
5.1 Learning objectives
5.2 Basic concepts
5.3 Effects of inflation
3 5.4 Measuring inflation
5.5 Core and non-core inflation
5.6 Measurement problems
5.7 Hyperinflation
5.8 Sacrifice ratios
6 Causes of inflation
6.1 Learning objectives
6.2 The Quantity Theory
6.3 The Phillips Curve
6.4 The P-Star Approach
6.5 The aggregate supply and demand models
6.6 Role and limitations of monetary policy
6.7 Empirical evidence
7 Monetary policy strategies
7.1 Learning objectives
7.2 Intermediate targets and indicators
7.3 Monetary policy strategies
7.4 The monetary policy strategy of the ECB
7.5 Definition and role of money
8 Financial markets
8.1 Learning objectives
8.2 Functions of the financial system
8.3 Direct and indirect finance
8.4 Financial institutions
9 Interest rates
9.1 Learning objectives
9.2 Basic considerations
9.3 Present value and future value
9.4 Determinants of interest rates
9.5 Determinants of the term structure
10 Money markets
10.1 Learning objectives
10.2 Basic considerations
11 Bond markets
11.1 Learning objectives
11.2 Basic considerations
11.3 Types of bonds
11.4 Calculating the value of a bond
11.5 Bond ratings
12 Stock markets
12.1 Learning objectives
12.2 Basic considerations
12.3 Calculating the value of a stock
12.4 Technical and fundamental analysis
12.5 Stock market indices
12.6 Equity risk premium
12.7 The Concept of Beta
13 Foreign exchange markets
13.1 Learning objectives
13.2 Basic considerations
13.3 Purchasing power parity
13.4 Interest rate parity
13.5 Exchange market interventions
13.6 Exchange rate regimes
13.7 ERM II
14 Derivative markets
14.1 Learning objectives
14.2 Basic considerations
14.3 Forward and futures contracts
14.4 Swaps
14.5 Options
14.6 Credit Default Swaps
15 Market efficiency
15.1 Learning objectives
15.2 Forms of efficiency
15.3 Behavioural finance
16 Banks and other financial institutions
16.1 Learning objectives
16.2 Commercial banks
16.3 Other financial institutions
16.4 Leveraging and deleveraging
16.5 Bank runs and banking crises
16.6 Key features of the banking system in the euro area
17 Money supply and money demand
17.1 Learning objectives
17.2 Monetary aggregates
17.3 The money supply process
17.4 Money demand
17.5 On the control of money supply
17.6 The monetary policy transmission process
17.7 Time lags of monetary policy
17.8 Interest-rate decisions of the ECB
17.9 Monetary policy instruments in the euro area
17.10 Monetary policy in times of financial crisis
17.11 Enhanced credit support
17.12 The Securities Market Programme
17.13 Three-year longer-term refinancing operations
17.14 Outright Monetary Transactions
17.15 Forward guidance
17.16 Negative deposit rates
17.17 TARGET2 issues
17.18 The way forward
18 Monetary policy in practice
18.1 Learning objectives
18.2 Real interest rates
18.3 Monetary Condition Indices
18.4 The McCallum rule
18.5 The Taylor rule
18.6 Monetary indicators
19 Asset price bubbles and monetary policy
19.1 Learning objectives
19.2 Asset price imbalances
19.3 Some historical examples
19.4 Debt-deflation and the Minsky moment
19.5 Detecting asset price booms and busts
19.6 Early warning indicator models
19.6 Monetary policy, asset and consumer prices
19.7 Searching for an equilibrium value for credit growth
19.8 Monetary policy responses
20 Multiple Choice test
21 List of symbols and abbreviations
22 Glossary
23 References
24 Endnotes