ECB must take into account openness of eurozone

Empirical evidence published by the Centre for Economic Policy Research contradicts the assumption that the euro-area works as a closed economy, which is used by the European Central Bank (ECB) to model optimal monetary policy.

The research looks at the yield on long-term government bonds in the zone, which it describes as the variable most directly related to current and expected monetary policy, to determine whether the response of long-term rates is consistent with a closed economy. It finds

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