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To: smolejv@gmx.net who wrote (4475)	10/23/1998 2:55:00 PM
From: smolejv@gmx.net	Respond to of 11051

European Central Bank (ECB) blew its big chance The footprint of the Bundesbank is as clear as it can be. The ecb policy can be summarized as follows 1. The main strategy will be the money-supply approach of the Bundesbank. The target (which money aggregate actually will stand for money) and the target growth rates, however, will not be given until December. 2. In spite of previous hints this strategy will not be expanded to include the inflation control. Price stability means inflation rate below two percent. No lower limit indicated. 3. The protocols of the ECB meetings (as opposed to US FED meetings for instance) will not be made public Critical assesment: nobody knows how the money demand will develop in the common currency environment. There's a number of factors, however, which indicate high volatility: 1. Increased market volatility will via cash positions influence the money demand - without causing any extra inflationary pressures 2. If Euro gets accepted as an attractive reserve currency replacement for DM , the money demand will rise strongly. 3. Additional "electronic cash" demand will be caused by temporary need to transact in euro and in still existing national denominations - with the effect, that the cash demand will decrease. The problem of pure money demand strategy can be understood by the following example: given the demand rises abruptly some time soon, the ECB will be forced to raise interest rates. And, if this is unfeasible due to economical reasons, they will have some explaining to do when it comes to ignoring their own policies and goals. abstracted from Boerse Online 44