Some of these implications are of interest not only to the research community, but also to policy-makers at central banks. This is because the interplay between the heterogeneity across households and differences in institutions and shocks can affect the functioning of the transmission mechanism of monetary policy. It is also of relevance for financial stability.
Cross-checking with the monetary analysis supports the case for continued vigilance with regard to the materialisation of risks to price stability over the medium term. With regard to both fiscal policies and structural reforms, the governments and institutions of the European Union will have to confront many important challenges in the course of 2005.