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EconomicsQ&A LibraryThe European Central Bank began operation in January 1999. The nineteen countries now covered by the ECB have a single monetary policy. However, it should be noted that while there is a positive correlation between economic activity in the countries, this correlation is not very high. Thus, member countries can experience wide ranges of economic conditions. Like the Fed, the ECB’s stated mission is to maintain a low and stable rate of inflation. Show and explain how the variance in economic conditions can make the implementation of monetary policy more challenging.Question

The European Central Bank began operation in January 1999. The nineteen countries now covered by the ECB have a single monetary policy. However, it should be noted that while there is a positive correlation between economic activity in the countries, this correlation is not very high. Thus, member countries can experience wide ranges of economic conditions. Like the Fed, the ECB’s stated mission is to maintain a low and stable rate of inflation. Show and explain how the variance in economic conditions can make the implementation of monetary policy more challenging.

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