In 1999 a number of member states of the European Union will adopt a common currency. This change in the monetary system requires that a Eur- opean Central Bank is set up and a common monetary policy is pursued. There is general agreement among those countries which are likely to join the common currency that price level stability has to be the ultimate objec- tive of monetary po1icy. It is an open issue, however, what kind of policy is best suited for that purpose. The alternative strategies under discussion are a direct inflation targeting, an intermediate monetary targeting or a mixture of...