central bank independence, monetary policy, european integration costs

Background - hypothesis:

Most of the theoretical assumptions and empirical analyses of costs of the European Monetary Integration process have concentrated solely on costs connected with loss of autonomous national monetary policy. All this work is based on an idea that a country with own national currency and autonomous monetary policy does not follow monetary policies elsewhere but focuses on own movements of output and prices. In other words, autonomous monetary policy in a country is independent of central bank’s monetary policy in other countries.

Objectives:

The aim of this article is to answer the question, whether central banks in small open countries are really independent of huge central banks in monetary unions, like the European central bank or Fed.

Data/Methods:

Sources of data: Eurostat database

Expected Results:

The authors show, that small central banks in countries, which foreign trade is closely related to countries in a monetary union, must slavishly follow the monetary policy of the huge union central bank. The empirical analysis focuses on short-term interest rates on the interbanking market. The causality is tested by cointegration analysis, Granger approach.