And loans to the private non-financial sector grew at a similar clip over this period. Monetary and credit aggregates are, therefore, good indicators of financial imbalances. The second, monetary pillar of the Eurosystem’s monetary policy strategy has therefore lost none of its importance.
This is particularly true as monetary developments can provide valuable additional information for the economic analysis of the Eurosystem, as demonstrated, for instance, by the work of Volker Wieland11 and of course by the Bundesbank’s experiences. The longer-term outlook provided by monetary analysis is important for another reason, too: macroeconomic variables such as the output gap are fraught with major estimation uncertainty.