Monetary aggregates continue to play an important role in the ECB’s policy
strategy. This paper revisits the case for money, surveying the ongoing
theoretical and empirical debate. The key conclusion is that an exclusive
focus on non-monetary factors alone may leave the ECB with an incomplete
picture of the economy. However, treating monetary factors as a separate
matter is a second-best solution. Instead, a general-equilibrium inspired
analytical framework that merges the economic and monetary “pillars” of the
ECB’s policy strategy appears the most promising way forward. The role played
by monetary aggregates in such unified framework may be rather limited.
However, an integrated framework would facilitate the presentation of policy
decisions by providing a clearer narrative of the relative role of money in
the interaction with other economic and financial sector variables, including
asset prices, and their impact on consumer prices.