Monetary Policy Of the European Union essay

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Introduction

The Monetary policy of the European union was decided upon by the European parliament, which holds significant legal entity over emerging European monetary concerns. This was necessitated since the passage of the statute that member states will be using a single currency for all the trade related activities. The setting up of significant policy frameworks was hence a necessary component in order to streamline monetary requirements with regard to currency and economic block fundamentals. The policy is a necessary of the European member states as a result of the monetary and economic union evident in the European union.  This forms the main guide to the achievement of the single market initiative operating under the new Euro currency.

Key Role Players

The European Central Bank (ECB) and the European System of Central Banks (ESCB) are among other key the key stakeholders in the policy formulation of the European Monetary Policy. The aim is to maintain price stability and maintain key monetary instruments. Among the key instruments that control the single monetary policy, include holding of minimum reserves, open market initiatives and fundamentals, and existing standing facilities (European Parliament).

European Union Monetary Policy Strategies

The initial role of the monetary policy is the achievement of economic analysis. This is essentially derived from the assessment of existing financial and economic milestones of member states (European Parliament). Among the components, include the breakdown of midterm risks occasioned by price stability. There are two key variables measured by the monetary policy and these are economic and financial variables (European Parliament). The variable components include an analysis of established ranges of price indicators, cost indicators, exchange rate fluctuations and stabilisation, impacts of the global economy, proper balancing of payment intervals, variations and tendencies in the financial markets, and finally the euro area balancing essentials (European Parliament). There are various factors, which come necessary during the assessment of presented dynamics in terms of recurring activities, price analysis, and developmental strategies. All these factors are subject to variations as a result of supply and demand changes in the services sector, capital markets, and market horizons.

The other central role of the monetary policy is the aspect of monetary analysis. This is mainly fronted by the European Central Banking authorities, which have regional control over monetary related issues. The initial assessment of the monetary analysis variables is the presentation of the key indicators through consistent monitoring of the prevailing factors after subsequent introduction of the new Euro currency (European Parliament). The main stimulant to this activity was the fact that monetary growth and inflation fundamentals form the key control aspects of the combined economy variables. There is an impending effect in terms of forecasting practices regarding monetary growth in the determination of inflation levels.

The main aim is to establish the short-term indicators for the monetary growth through continuous assessment of periodic economic changes, financial changes, liquidity considerations, and central bank’s role definition (European Parliament). There is also a general focus towards the achievement of streamlined objectives between central banks and other banking institutions in the European Union member states. The policy also stipulates the operation of the central bank free from the political influence after subsequent theoretical analysis of empirical evidence presented on the European Banking independence (European Central Bank 12). In order to safeguard this independence, most of the financial arrangements are isolate from through content analysis from the overall European Community.

The policy also stipulates significant control measures regarding the resulting effects from fiscal policies and budgetary policy fundamentals. This is because fiscal policies have a great impact to inflation and economic growth (European Central Bank 21). This is control through the establishment of specific control measures when occasioned by fluctuating economy and market set prices. This is also established through pre determining the government expenditure, revenue, budgetary deficits, and public debt arrangements (European Central Bank 21).

Sound public finance arrangements are enabled through the stipulation of specific budgetary initiatives to which member states are supposed to restrict themselves. This is essentially achieved by institutional arrangements in the European Union level (Central Bank 21). In the monetary policy document, there is also a general requirement of member states to submit their proposed stability programmes which are targeted at enabling sufficient surveillance of monetary activities. The proposed programs need to be converged into a single programme in order to integrate financial objectives according to the initial set goals and targets.

The implementation process of the policy instruments and procedures require a consistent arrangement of the open market operations, standing facilities and holding minimum reserves (European Union Parliament). Open market operations involve the arrangement of main financing operations, long term refinancing programmes, fine tuning strategies, and structural components. Standing operations involve the arrangement of marginal lending programme and deposit facilities. Minimum reserves holding is essentially a duty of credit institutions mandated by the council.

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