The Italian Monetary policy in perspectives: lessons from monetary history of Italy before EMU

Italian monetary policy after World War II evolved through three stages in which instruments, targets and effectiveness varied under the aegis of international context and European integration. The Italian monetary history testified the ongoing obsolescence of the direct control of monetary aggregates and the loss of effectiveness in influencing the economic cycle. Since 1971, monetary policy assumed a pro-cyclical behavior dismissing the anti-cyclical role covered under the Bretton Woods system. Yet, the management of monetary aggregates shows up inadequacy also in amplifying the cycle. The reasons of the ongoing ineffectiveness lies on the difficulty in reconciling the domestic targets in terms of growth and employment level with the European economic and political integration which required more market friendly policies. Moreover, the likely “pity” of the Italian policy makers was to ignore that the growth paradigm marked by the IT revolution were becoming less efficient than under the extensive growth paradigm of the Golden Age.