57 / 145
MONETARY POLICY AND THE PRODUCTIVE ECONOMY IN THE EUROZONE
57
cus on the impact on money supply, the funda-
mental reference regarding price stability is the
balance between supply and demand for mon-
ey (
Chart 11
).
Therefore, following the regulatory criterion
of the Treaty of the European Union, any policy
that by making use of the creation of money
has a positive or negative effect on the demand
for money meets the requirements to be de-
scribed as an integral part of monetary policy.
It is essential, in this respect, to recall that
economic growth is the most direct influencing
factor on the demand for money, especially in
the medium and long term.
Chart 11.
Bank credit is also the link between monetary policy and the demand for money
Source:
EKAI Center.
Eurosystem
Banking
sector
+/- growth
+/- money
supply
Price stability
+/- demand
for money
+/- credit to
the real
economy
Non-productive
activities
Inflationary
impact
↑
Money supply
No growth
(no
↑
demand
for money)
↑
money supply
Growth
(
↑
demand
for money)
Productive
activities
No inflationary
impact
Eurosystem
Monetary
expansion
Chart 12.
Monetary policy and growth policy
Source:
EKAI Center.