Eurozone Rate Cuts in 2008: Oui or Nein?

Abstract

This case describes the trade-offs inherent in monetary policy for open economies in a highly globalized world. The focus is on the economic, financial, and political pressures facing policy-makers at the European Central Bank as they weigh the pros and cons of their next interest rate decision. Specific attention is given to the challenge of setting monetary policy in the EU when two of its largest economies, Germany and France, are facing somewhat opposite economic circumstances.