Understanding Monetary Policy and the Role of Money: A Comprehensive Guide, Appunti di Lingua Inglese

Scarica Understanding Monetary Policy and the Role of Money: A Comprehensive Guide e più Appunti in PDF di Lingua Inglese solo su Docsity! http://www.theneweconomists.wordpress.it Rainey – modulo 2 – the question of money 1 Rainey – modulo 2 THE QUESTION OF MONEY VOCABULARY: many words to talk about money Money = soldi, denaro Cash = contanti, denaro contante Coins = monete, spiccioli Notes = banconote (also called bankonotes or bills) Currency = valuta (euro, dollaro) Income = reddito, entrata 1. Monetary Policy WHAT IS MONEY = What‟s the function of money? 1. Money is a means of payement. Money is a medium of exchange. People do exchange: we produce something and we need something produced by others; we can‟t do all by ourselves. The first exchanges were things for things: it‟s barter. Then the man began to use precious metals like gold or silver: the value were represented by the precious metal used. After that we started using coins, metal disks with a face value and banknotes. (to settle= to pay; settlement= pagamento) 2. Money is a unit of account. It‟s the unit in which prices are quoted. For money to be an effective medium of exchange it must be a unit of accunt, conventional and recognizable. If we go in Uk, Euro isn‟t unit of account, (it‟s Pound). 3. Money is a store of value. To be a unit of account money must also represent a value. It‟s the intrinsic requirement of money in order for it to be used as a standard of deferred payment 4. It‟s a standard of deferred payment (pagamenti differiti). For future payment. It must to maintain his value. Different kinds of “money” satisfy the four requirements we have seen. Different types of money have different degrees of liquidity: cash is the most liquid type of money; other types of money are less liquid because you‟ve to wait for a while before use it to purchase things. They‟re grouped togheter in “money aggregates”. More types of money you include in the aggregate, broader the aggregate becomes. Fewer types of money you include, the narrower the aggregate becomes. The aggregates range from “narrow money” to “broad money”. There‟re differences between countries in their definition of broad and narrow money. In the euro area monetary aggregates are:  Narrow money M1: currency in circulation, overnight deposits (depositi a breve termine), repurchase agreements (pronti contro termine)  M2: M1 + deposits redeemable (esigibili) at notice of up 3 months, deposits with an agreed maturity of two years,debt securities issued with an original maturityof less than two years  Broad Money M3: M2 + redeemable over 2 years. The value of money We use money to purchase (=acquistare) goods. Money has a purchasing power (potere d‟acquisto): purchasing power is the value of money. The enemy of value of money is inflation. Inflation is the general increase in prices. Prices increases because they ask for more money, but they don‟t produce more. If you have a fix income but prices rise your purchasing power decreases. You can simply soffer it, or organize with other people to defend your purchasing power, asking for an increase of your income. If you have bargaining power (potere contrattuale), you demand an increase in your wage to cover the increase in costs. You will not produce any more or work any harder to 'earn' the difference. This leads to inflation. If you don't have bargaining power, you will be poorer An objective of monetary policy is defend the purchasing power of money http://www.theneweconomists.wordpress.it Rainey – modulo 2 – the question of money 2 Monetary policy Policy in italian means “politica”. Whith this world we have two different meaning expressed in two different english words: Politics is the science or art of political government or the practice or profession of conducting political affairs (I hate politics = odio la politica); Policy is a course of action adopted and pursued by a government, in order to achieve an universal objective. Government create strategies to reach these objectives. There‟re different type of policy: monetary policy, fiscal policy, education policy, helthcare policy. The purpose of monetary policy is to maintain money value, his purchasing power. Inflation erodes the value of money. Central bank is responsable of monetary policy (ECB in UE, bank of england in UK, Federal reserve in USA). The Central Bank is the bank of private banks and has the sole right of issuing currency (monopoly: print money): it decide the cost of money, his price. In economy everything has a price: money has a price. Why central bank decide monetary policy? This is a shared vision today. Till 1997 governament fixed the cost of money. Political parties wants power and they need to be voted. They‟ve to get consenses, and they make promises. People want money: the fastest way to get their approval is to give them money. They cut the cost of money, so people can borrow money without spending a lot in interests. This is an irresponsable choice, this cause inflaction bacuse people have too much money, the demand rise and the prices increase. So central banks today decide the cost of money, without listening political parties. Monetary policy has a territorial validity, where money has legal value (dove ha valore legale). ECB policy applies in Ue, Federal Reserve policy applies in USA. The role of monetary policy There‟s a big difference between monetary policy and fiscal policy. Fiscal policy is about spending money and taxes. Both have an important role because there‟s no perfect market system: we can try to gat close to perfection solving problems of economics system. A problem of economic system is the connection between supply side (what people produce) and demand side (what people consume, want, desire). In a perfect model, as hypothesized in Classical Model, supply side and demand side are always in equilibrium level. In reality demand side and supply side aren‟t in equilibrium because: - there‟re assimetric information: someone knows more than other people. Not everyone could make choices with rational information - monopoly, dominant positions, trust - there‟re exogenous shocks. The shock is something unexpected who have a long term effects (positive or negative). The shocks shakes economic system. Examples of shocks are an earthquake, a war, etc. These mistakes lead to a downturns which then become self-fulfilling because economy goes down and people think they will go down even further. Rapidity in adjusting prices and wages in the real world is lacking and people makes mistakes in terms of information. The natural tendency of the economy to return in equilibrium will take a very long time to operate, the variables are sticky. To reach equilibrium we have to fight this phenomena. What‟s the role of the State? - The keynesian and the monetarist debate In the last century there were lots of shocks. The economic system of 19th century were dominated by England. Germany and Usa come later. British economy passed to one crisis to another in this period. This cycles were longer and longer: What could be done to stop inefficiency? There were big faith in science, so people thought that economy could fix the system. A lots of economics fact can be planned, even a lots of economics aspects depend of psychological elements. Keynes thought that we could fix the system doing something: the state intervenes in the economy to fix its problems. Governments could change expectations from a slowing down to a self-fulfilling moving up, so bringing the economy back into equilibrium a bit quicker. http://www.theneweconomists.wordpress.it Rainey – modulo 2 – the question of money 5 How can the central bank transit this variation? C E C E C The monetary policy transmission works also through other channels. THE MONETARY POLICY TRANSMISSION MECHANISM Monetary policy works via its influence on aggregate demand in the economy: it determs the value of money, its cost. In the long run monetary policy determines the general price level; in essence determines the value of money, movements in the general price level indicate how much the purchasing power of money has changed over time. Monetary policy is influeced by other phenomenals wich make faster the running from monetary policy decisions to their effect in economy (reality). Central bank has the power to change the cost of money: it can determinate a specific interest rate in the wholesale money market (mercato all‟ingrosso di moneta) because it‟s a monopoly supplier of “base money” (known also as “high-powered money” or “MO”). This whole includes notes, coins and bankers‟ deposits at the Bank of England. The principal task of central bank is change the cost of money, influenced by the supply of money: that indirectly affects the level of consumes. If the Central Bank want to stimolate demand, it can utilise the policy variation , cut the cost of money with small variations. The quantitave effect of a change in the official rate on interest rates and on financial markets in general, will depend on the extent to which policy change was anticiped and how the change affects expectations of future policy: for simplicity we will assume the change are not expected to be reversed quickly and no further change are anticipated as a result. (L'effetto quantitavo di una variazione del tasso ufficiale di riferimento fissato dalla banca centrale sui tassi di interesse e sui mercati finanziari in generale, dipenderà dalla misura in cui era stato previsto il cambiamento di politica e di come il cambiamento interessa le aspettative sulla politica futura: per semplicità supponiamo che la politica che ha portato alla variazione del tasso non verrà invertita in modo rapido e non ci sono ulteriori modifiche previste come risultato) The principal players of the mechanism are commercial banks and us. Central bank can cut interest rate: that discourages saving (risparmio) (interests decrease) and increase demand. The problem is find how much is proper increase demand.  The bank chooses the price at which it will lend high-powered money to private sector institutions. The bank lends predominantly through sale and repurchase agreements (repo = pronti contro termine) at the two week maturity. Commercial banks lend money by repos, a secure transation. The commercial bank sell assets to Central Bank (who accepts only quality assets). The private banks repurchase the assets in two weeks at a set price. The Repo rate is the difference between the selling price of assets and the repurchase price. A repo is a contract: subject of the contract are the assets. I pronti contro terminesono contratti nei quali un venditore (generalmente una banca) cede un certo numero di titoli a un acquirente e si impegna, nello stesso momento, a riacquistarli dallo stesso acquirente a un prezzo (in genere più alto) e ad una data (termine) predeterminati (a quella data l'acquirente deve avere i titoli pronti). L'operazione consiste, quindi, in un prestito di denaro da parte dell'acquirente e un prestito di titoli da parte del venditore. La banca centrale acquista titoli dalle banche private che necessitano finanziamenti ed esse si impegnano a riacquistarli entro 2 settimane a un prezzo fissato: la differenza tra il prezzo d‟acquisto e quello a cui vengono ricomprati è l‟interesse. CB cuts cost of money Commercial banks cut their rates (because they‟ve less costs) Reduction in banking costs should lead to an increase in aggregate demand: borrow money costs less, so people borrow more money and consume more. http://www.theneweconomists.wordpress.it Rainey – modulo 2 – the question of money 6  Repos and interbank deposits are influenced by the official rate A change in the official rate is immediatly transmitted to other short-term sterling wholesale money- market rates (Repos and interbank deposits).  Soon after the official rate change, banks adjust their standard lending rates, usually by the exact amount of the policy change. This quickly affects the interest rates of variable-rate loans (prestiti). Borrowing rates offered to savers also change, in order to preserve the margin between deposit and loan rates. Rates on variable or floating mortgages will also change. Mortgages (mutui ipotecari): the bank lend money with a garancy. If the good (garancy of the loan) increase his value, i can ask to the bank more money.  Changes in official rate affect the market value of securities, such as bonds and equities (= obbligazioni e azioni) Bonds: there are different types (short time, medium time... ) A company or a country utilise bonds to borrow money. Countries must have reliability (affidabilità) because I lend money if i‟m quite sure to receive interests and my principal (capitale investito) back. Borrower are affected by 2 factors:  Higher is the reliability of the subject, lower is the interest  Higher long-term interest rate, higher is the cost of money They‟ve a price: initial price (the difference between the initial price and the money who the holer receives is the interest rate) and a possible price on the market . A rise in long-term interest rate lowers bond prices (the interest grow). This is because our future isn‟t sure, the present value of any given future income stream falls (il valore attuale di qualsiasi entrata futura crolla), consequently asset holders feel poorer  wealth effect If other things are equal (especially inflation expectations), higher interest rates also lower other securities prices, such as equities.  Changes in official rate affect exchange rate. Exchange rate is the relative price of domestic and foreign money, so it depends on both domestic and foreign monetary conditions. An unexpected rise in the official rate will probably lead to an immediate appreciation of the domestic currency in foreign exchange markets. The exchange rate appreciation follows from the fact that higher domestic interest rates, relative to interest rates in equivalent foreign-currency assets, make sterling (sterline) assets more lucrative to international investors: they demand sterling to buy them, so the exchange rate change because they increase the demand of sterling. (L'apprezzamento del tasso di cambio deriva dal fatto che i più alti tassi di interesse interni, relativamente ai tassi di interesse in equivalenti titoli esteri, rendono i titoli nazionali più redditizi per gli investitori internazionali: chiedono sterline per comprare loro, così la variazione del tasso di cambio in quanto aumentano la domanda della sterlina.). Exchange rate changes lead to changes in the relative prices of domestic and foreign goods and services.  Expectations and confidence Official rates changes can influence expectations about the future course of real activity in the economy, and the confidence with wich those expectations are held. They could change expectation and confidence. A rise could be interpreted in two ways: the bank believes that the economy is growing faster than prevously thought (good expectations) or the economy should be slowed down (bad expectations). SCHEMA: CENTRAL BANK CUT THE COST OF MONEY. WHAT‟S HAPPENED? Central bank has the power to change the cost of money: they cut the cost of money Choosing a lower price of repos and interbank deposits Less interest on loans, less interest for saver Less interests on loans, less interests for saver National assets becomes less lucrative: less appreciation of our currency in foreign exchange market. The exchange rate decrease. Expectations: they couyld be different, good or bad? http://www.theneweconomists.wordpress.it Rainey – modulo 2 – the question of money 7 Quantitative Easing  central bank purchase financial assets from private sector Now the Central Bank cannot stimulate economy by cutting the interest rate because rates are already low. The interests rates cannot fall below zero. In this context (drammatical situation) we need an extraordinary measure called Quantitative Easing.  The bank inject money directly into the economy Financial banks and central bank are connected with a daily relationship. The central bank is the boss of commercial banks because decides cost of money, rules and regolations. Commercial banks borrow money from central bank:  Quantitative easing (QE): extraordinary operation  Ordinary operations I need cash. The difference between economic situation and financial situation is that economic situation deals with (ha a che fare con) how much cash you liquid now while financial situation deals with how much cash you liquid ever. One way to get cash is to sell assets. Other way is borrow money. Commercial banks borrow money by repos. The Repo rate is the difference between the selling price of assets and the set repurchase price. If central bank wants to increase the Repo rate, it must decrease the sells of assets. Central bank collect cash from commercial banks: this happen every day. If the Central Bank reduce the quantity of money on the market, the repo rate increase. When central bank buys financial assets, it provides money. If central bank sell assets, it take money away from the market (reduce the offer of money). The money market is where MFI take money REPOs A repurchase agreement (repo) is the sale of securities (usually government debt) tied to an agreement to buy the securities back later. A reverse-repo is the purchase of a security tied to an agreement to sell back later. It is widely used in financial markets as an alternative to collateralised lending as it can fulfil the same economic function while offering greater flexibility and better security. Repo is increasingly being used by central banks in their own monetary operations, and can also be important in the development of liquidfinancial markets in emerging economies. These agreements can be viewed as loans secured against the security. The effective interest rate is called Repo rate. Which transactions are called repos and wich are called reverse repo varires between the markets. The transaction may be looked at from the point of view of a dealer dealing with a costumer or vice verse. What is called a repo in one country may be called reverse repo in other country. Generally, whether an agreement is called a repo or reverse repo depends on which pary initiates the transaction. In the Uk, a repo between a dealer and the Bank of England or between a dealer and an individual investor is looked at from the dealers‟ perspective: if a retail investor buys securities from a dealer (negoziatore, intermediario, distributore), the transaction is termed a repo as the dealer sells the security with the agreement to buy it back. The purchase by a dealer from the central bank it‟s called a reverse repo. A central bank‟s Repo rate is an important instrument of monetary policy, as the central bank is the lender of last resort. The Repo rate in the Uk is set by the MPC (Monetary Policy Commitee of Bank of England) How repo works A repo is a sale and repurchase agreement: Party A sells securities to Party B with a legally binding agreement to purchase equivalent securities from Party B for an agreed price at a specified future date, or at call. Party B may use or dispose of them as it pleases; but it has an obligation to deliver equivalent securities to Party A at the end of the repo. The interest rate implied by the difference between the sale price and “repurchase” price is the repo rate. If Party A is selling securities to Party Financial assets http://www.theneweconomists.wordpress.it Rainey – modulo 2 – the question of money 10 http://www.theneweconomists.wordpress.it Rainey – modulo 2 – the question of money 11 The extra money has worked its way through the economy, resulting in higher spending and therefore growth. Bank of England buys most of the assets from the wider economy rather than the banks, because an increase of bank‟s reserve (Central Bank credit money in reserves account) couldn‟t lead to an increase of lending to consumer and businesses because banks are concearned about their financial health, they may prefer to hold the extra reserves without expanding lending. The Bank of England‟s purchases of both government and corporate bonds also increase the total demand for those types of assets, pushing up their prices. This is another way in which the Bank‟s actions will make it cheaper for companies to raise finance. To understeand if the mesures are working we have to observe: - impact on terms and conditions offered on loans - how much banks lend money - degree to which the cash injection boosts the growth of money MONETARY POLICY: THE ROLE OF A CENTRAL BANK (pagina 8) Core purposes of a central bank (changed!!!) 1. Monopoly provider of money 2. Responsable for monetary policy 3. Supervision on bank system One of the Bank of England‟s core purposes is „maintaining the integrity and value of the currency‟. The Bank pursues this core purpose primarily through the conduct of monetary policy. Above all, this involves maintaining price stability, as defined by the inflation target set by the Government, as a precondition for achieving a wider economic goal of sustainable growth and employment. High inflation can be damaging to the functioning of the economy. Price stability can help to foster sustainable long-term economic growth. The Bank aims to meet the Government‟s inflation target by setting short-term interest rates. Interest rate decisions are taken by the Monetary Policy Committee (MPC) of the Bank. Monetary policy operates by influencing the cost of money. The Bank sets an interest rate for its own dealings with the market and that rate then affects the whole pattern of rates set by the commercial banks for their savers and borrowers. This, in turn, affects spending and output in the economy, and eventually costs and prices. Interest rates are set at a level to ensure demand in the economy is in line with the productive capacity of the economy. If interest rates are set too low, demand may exceed supply and lead to the emergence of inflationary pressures so that inflation is accelerating; if they are set too high, output is likely to be unnecessarily low and inflation is likely to be decelerating. How the Bank of England sets interest rates In its open market operations, the Bank deals with a small group of counterparties who are active in the money market: banks, securities dealers and building societies are eligible to take on this role. The Bank holds on its balance sheet assets acquired from its counterparties in its money-market operations. These are mostly private sector obligations; they are short-term and a proportion of them matures every business day. This means at the start at every business day, the private sector is due to pay money to the Bank to redeem these obligations. However, in order to do so, the Bank‟s counterparties typically have to borrow additional funds from the Bank. This gives the Bank the opportunity to provide necessary finance once more, at its official repo rate. Central Bank finance private sector with Repo. La Banca detiene attività patrimoniali acquisite dalle sue controparti nelle operazioni di mercato monetario. Si tratta per lo più obbligazioni del settore privato:sono a breve termine e una parte di essi matura ogni giorno lavorativo. Ciò significa che all'inizio di ogni giorno il settore privato è deve a pagare alla Banca il rimborso di quella parte di obbligazioni. Tuttavia, per farlo, le controparti della Banca hanno in genere bisogno di ottenere nuovi finanziamenti dalla Banca, che è la banca delle banche. Questo dà alla Banca la possibilità di fornire finanziamento necessario ancora una volta, al suo tasso ufficiale di pronti contro termine. http://www.theneweconomists.wordpress.it Rainey – modulo 2 – the question of money 12 EXCHANGE RATES A change in interest rate may have a consequence on the exchange rate. The exchange rate is the relative price of domestic and foreign money. When you change money, you‟re selling your currency to buy foreign money. Currency change is a financial operation. At what price? The prices of everything vary according to demand (theory of prices). This theory is applied to the purchase of currency too. To get price stability, i need also currency stability. They exist two exchange rate regimes:  FLOATING REGIME: any exchange rate variation is caused by supply and demand variations. It‟s easier for an economy to adjust to external shocks. This system allows to countries to devote monetary policy to domestic ends such as price stability, rather than having to use interest rates to keep the exchange rate on target. Speculation is a problem of this regime. Exchanges rates can be volatile and, on occasion, grossly misaligned.  FIXED REGIME: the exchange rate of currency is fixed. Stability is an advantage of a fixed regime Bretton Woods and the consequences (p. 10 riassunto) The Bretton Woods agreement of 1944 (in which Keynes played a crucial role) established fixed exchange rates, defined in terms of gold and the US dollar. Between 1944 and 1971, many currencies were fixed or pegged against the US dollar. Under this system, overvalued or undervalued currencies could only be adjusted with the agreement of the International Monetary Fund (the IMF). These adjustments were called devaluations and revaluations. The decision on the part of a country to defend its currency against attacks from other investors often resembled a siege-like mentality as the central bank would furiously buy its currency and see its reserves diminish. Generally, such an approach ended with the inevitable devaluation which currency markets had been asking for. The devaluation of sterling in 1967 effectively ended a period of constant runs against the pound which only devaluation. Increasing inflationary pressure in the late sixties and early seventies made gold convertibility unworkable. When the United States abandoned Bretton Woods in 1971 (the Federal Reserve did not have enough gold to guarantee the USdollar), the exchange-rate agreement of the post-war years was effectively over. It was replaced by a system of floating exchange rates. A freely (or clean) floating exchange is determined purely by supply and demand. Theoretically, in the absence of speculation, exchange rates should reflect purchasing power parity - the cost of a given selection of goods and services in different countries. The problem with such a system is that a country‟s currency is subject to speculation. In breve: Bretton woods  fixed rates. Overvalued or undervalued currencies could only be adjusted with the agreement of the International Monetary Fund. Everyone wanted to defend hos currency against attack from other investor. Such an approach ended with the inevitable devaluation which currency markets had been asking for. Increasing inflationary pressure in the late sixties and early seventies made gold convertibility unworkable  Floating exchange rates: A freely (or clean) floating exchange is determined purely by supply and demand. Theoretically, in the absence of speculation, exchange rates should reflect purchasing power parity but there‟re speculations. http://www.theneweconomists.wordpress.it Rainey – modulo 2 – the question of money 15 1998: The European Council agrees that 11 member states - Belgium, Germany, Spain, Italy, Ireland, Luxembourg, the Netherlands, Austria, Portugal and Finland - are ready to adopt the euro on 1 January 1999. European Central Bank established in Frankfurt to maintain price stability and set interest rates in the eurozone. 1999: Stage three of EMU: The euro is launched as an electronic currency used by banks, foreign exchange dealers, big firms and stock markets. Exchange rates of the participating currencies are set and eurozone countries begin implementing a common monetary policy. 2000: A referendum in Denmark ends with 53% of Danish voters rejecting entry to the euro. 2001: Greece joins the euro 2002: Euro coins and notes become legal tender and national currencies become obsolete. THE EURO and THE EUROPEAN UNION Why did EU create Euro?  Economic reasons  Political reasons. Eu is a single market. Uniform regolation were reached by creating a single currency. This decision made necessary to create a Central Bank who decides the monetary policy for the eurozone: the monetary policy have to be homogeneous. OCA  optimus currency area: a language, a law, a currency, like USA. EU is not OCA because there‟re different languages, different laws. The UK and denmark don‟t have euro: they decides to maintein their currency Will britain join the European Monetary Union (EMU)? (pagina 13 dispensa ) The decision will be decided by a referendom, but it‟s not certain when. Gordon Brown has presented what he believes are five tests for euro entry: 1. Test 1: convergence Are business cycles and economic structures compatible so that britain and EU can live comfortably with euro interest rates on a sustainable basis? This test face the exchange rate and the housing market. Prices in the british property tend to rise whenever borrowing costs fall, making it difficoult for the country to live comfortably with low levels of interest rates. Britain should join EMU with a low exchange rate to avoid germany‟s miserable experience to join the euro at too high exchange rate.( i cicli economici e le strutture economiche sono compatibili in modo che la Gran Bretagna e l'UE possano vivere sostenibilmente con i tassi di interesse in euro?I Prezzi del mercato immobiliare britannico tendono a salire ogni volta che i costi dei prestiti calano, rendendo difficilissimo per il paese per vivere comodamente con bassi livelli di tassi di interesse. La Gran Bretagna dovrebbe entrare nell'EMU, con un tasso di cambio basso per evitare brutta esperienza della Germania di aderire all'euro al tasso di cambio troppo alta.) 2. Test 2: flexibility If problems emerge, is there sufficient flexibility to deal with them? This test is purpose to ensure the any convergence with the eurozone is sustainable. If a global shock affects british economy in a different way from the eurozone economies, then it‟s difficoult to argue that convergence will be durable. If isn‟t, it‟s difficoult to british economy to prosper in a single european currency. Britain‟s labour market is very different, more flexible and this represent an economic advantage which UK doesn‟t want to lose to reach convergence. 3. Test 3: investment Would joining EMU create better conditions for firms making long term decisions to invest in Britain? Some evidence suggests that a number of multinationals would look more favourably upon the UK as a potential investment location if it joined the euro, and pro-euro campaigners believe that the impact on investment will be one of the most important economic benefits. http://www.theneweconomists.wordpress.it Rainey – modulo 2 – the question of money 16 4. Test 4: financial services What impact would entry into EMU have on the competitive position of the UK‟s financial services industry, particularly the City of London‟s wholesale markets? Most independent analysts believe that this test has already been passed. When the Treasury assessed the pros and cons of EMU entry back in October 1997 it was decided that although the City was likely to benefit outside the euro, the single currency would help the UK financial services sector fulfil its potential. That conclusion probably is still valid today. 5. Test 5: growth, stability and jobs In summary, will joining EMU promote higher growth, stability and a lasting increase in jobs?” This is the catch-all test. It can only be passed if all the other four tests have been satisfied, allows the Chancellor Mr Brown to provide a “big-picture” view of the likely effects of euro entry. The detail on this test points to two potentially interesting developments in the euro debate. The focus on the Growth and Stability Pact – the eurozone‟s tough rules on tax and spending – suggests that the Chancellor will continue to encourage Europe to reform these guidelines ahead of any British decision to join. DOMANDE DI ESEMPIO fatte a lezione 1) What is money? 2) What are the characteristic of money? 3) What is monetary policy? 4) Which caused the end of Bretton-Woods? 5) Advantages of monetary policy done by central bank? 6) 2002: what happened? 7) 1999: what happened?