European Monetary Union

Claudia Kwapil/Ernest GnanJuly 15 – July 264 ECTS credits


In no other area has European integration advanced as much as in the monetary sphere. By joining the European Economic and Monetary Union (EMU), 20 countries of the European Union have given up their national currencies and their monetary sovereignty and have created a common monetary area with a joint central banking system (Eurosystem) and a common European currency (euro). On the one hand, the euro – in form of notes and coins – provides a strong common European symbol. On the other hand, it is a powerful policy instrument.

The financial, economic and debt crises along with the COVID-19 crisis, have underscored the power of monetary policy. Starting in 2008, the Eurosystem has implemented a series of unconventional monetary policy measures, ranging from negative policy rates to asset purchase programs. More recently, during the COVID-19 crisis, there was once again a need for monetary policy support to bolster the European economy, prompting the Eurosystem to further expand its arsenal of unconventional monetary policy measures. Since 2021, in line with other parts of the world, combating rapidly escalating inflation has emerged as the foremost priority for the Eurosystem.


This course will enable to answer the following questions:

  • Why do most central banks have an inflation target? And why in many cases of 2%?
  • Will central banks globally manage to bring soaring inflation back to target?
  • How do central banks influence economic growth and inflation?
  • Which instruments do central banks have at their disposal?
  • What is the difference between conventional and unconventional instruments? How do they work?
  • Why are central banks independent institutions?
  • Is the euro area an “optimal currency area” as described in textbooks?
  • What are the objectives and instruments of different areas of economic policy (fiscal policy, structural reforms, financial stability policy)? What is the division of labour with central banks?
  • What are the different views on the further development and deepening of the euro area?
  • Will there be a digital euro for euro area citizens in the future?


Requirements: Active class participation (20%), mid-term exam (40%) and final exam (40%).


This course is regularly organized with the support of the Oesterreichische Nationalbank (Austrian Central Bank).