The European Central Bank: Credibility, Transparency, and by Jakob de Haan

By Jakob de Haan

The adoption of the euro in 1999 by way of eleven member states of the eu Union created a unmarried forex sector moment in financial dimension simply to the United States. The euro zone's financial coverage is now set by way of the eu valuable financial institution (ECB) and its Governing Council instead of via person nationwide valuable banks. This CESifo quantity examines concerns that experience arisen within the first years of ECB financial coverage and analyzes the impression that present ECB coverage process and constructions can have within the future.After an in depth description and review of ECB financial coverage making that makes a speciality of such matters as fee balance and the predictability of coverage judgements, the ebook turns to 2 very important matters confronted by way of ecu relevant bankers: the transparency and credibility of selection making and the ECB's decentralized constitution. After displaying that transparency in determination making complements credibility, the e-book discusses the ECB's efforts at openness, its political independence as assured by way of legislations, and its final responsibility. The booklet then considers the results of the decentralized ECB constitution, concentrating on enterprise cycle synchronization, inflation differentials, and modifications in financial coverage transmission in gentle of the growth of the financial union. The ebook additionally discusses innovations for ECB institutional reforms, together with centralization, vote weighting, and cross-border neighborhood banks.

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2, while the third and fourth columns show whether according to the FT and the FAZ this decision was in line with financial market expectations. We only report those decisions on which the journalists had something to say about financial markets’ expectations. 25 percentage point rise had been deemed highly unlikely (FT, 10–19–00) Financial markets had expected decision (FT, 11–3–00) Decision was in line with market expectations (FT, 11–17–00) Step widely anticipated in financial markets (FT, 12–1–00) FAZ report According to this analysis the policy of the ECB during 1999 was in line with financial market participants’ expectations.

12 Second, as Meltzer (2001) and others have argued, transmission mechanisms other than the nominal interest rate are effective at the zero lower bound. Bernanke and Gertler (1995), for example, show that the credit channel mechanism is not hampered by a lower zero bound on interest rates. Third, as Buiter and Panigirtzoglou (1999) and Goodfriend (2000) have proposed, a carry tax on money (both currency and bank reserves) can be introduced to circumvent the interest floor. The possible success of this suggestion depends on the availability of technologies that make it feasible without high costs.

3 shows, the ECB was successful in keeping inflation at a low level in the euro area. Nevertheless, inflation was sticky at a level above the ECB’s medium-term objective. 3 Inflation in the euro area, 1999 to 2002. (Source: Data provided by De Nederlandsche Bank) (2002) interpreted this to be due to some extent to steady inflationary pressures in the services sectors. 2 Is the Below 2 Percent Inflation Objective Too Low? 3 also brings us to the question of whether the ECB has been too deflationary.

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