The European Central Bank

by de Haan, Jakob; Eijffinger, Sylvester C. W.; Waller, Sandra; Haan, Jakob De

• ISBN13: 9780262042260
• ISBN10: 0262042266
• Format: Hardcover
• Copyright: 2005-05-01
• Publisher: Mit Pr

Summary

The adoption of the euro in 1999 by 11 member states of the European Union created a single currency area second in economic size only to the United States. The euro zone's monetary policy is now set by the European Central Bank (ECB) and its Governing Council rather than by individual national central banks. This CESifo volume examines issues that have arisen in the first years of ECB monetary policy and analyzes the effect that current ECB policy strategy and structures may have in the future. After a detailed description and assessment of ECB monetary policy making that focuses on such issues as price stability and the predictability of policy decisions, the book turns to two important issues faced by European central bankers: the transparency and credibility of decision making and the ECB's decentralized structure. After showing that transparency in decision making enhances credibility, the book discusses the ECB's efforts at openness, its political independence as guaranteed by law, and its ultimate accountability. The book then considers the effects of the decentralized ECB structure, focusing on business cycle synchronization, inflation differentials, and differences in monetary policy transmission in light of the enlargement of the monetary union. The book also discusses options for ECB institutional reforms, including centralization, vote weighting, and cross-border regional banks.

Table of Contents

Series Foreword	vii
Preface	ix
Introduction	1	(8)
The Start of the Monetary Union	1	(1)
Main Issues	2	(7)
The ECB: Structure, Strategy, and Policy	9	(18)
Introduction	9	(1)
Structure of the E(S)CB	10	(1)
Monetary Policy Strategy of the ECB	11	(5)
Monetary Policy of the ECB	16	(5)
ECB's Evaluation of Its Monetary Policy Strategy	21	(4)
Conclusions	25	(2)
The ECB's Strategy: An Assessment	27	(56)
Introduction	27	(1)
Predictability of Policy Decisions	27	(9)
Inflation Objective	36	(11)
Role of the First Pillar	47	(9)
Inflation Forecasts	56	(1)
External Value of the Euro	57	(17)
Asset Price Inflation	74	(4)
Interest Stepping versus Smoothing	78	(2)
Conclusions	80	(3)
Transparency, Accountability, and Credibility of the ECB	83	(42)
Introduction	83	(2)
Transparency and Disclosure: Theory and Evidence	85	(9)
Transparency of the ECB	94	(14)
Accountability of the ECB	108	(4)
Blinder's Survey on Credibility	112	(5)
Credibility of the ECB	117	(6)
Conclusions	123	(2)
Centralization or Decentralization	125	(44)
Introduction	125	(1)
The Decentralized Eurosystem	125	(5)
Risks of Decentralization	130	(7)
Diverging Business Cycles in the Euro Area?	137	(11)
Different Inflation Rates in the Euro Area	148	(12)
Differences in Monetary Policy Transmission and Financial Structure	160	(7)
Conclusions	167	(2)
New Member Countries	169	(44)
Introduction	169	(1)
Central Bank Independence and Convergence	170	(22)
Implications of Enlargement of the Monetary Union	192	(18)
Conclusions	210	(3)
Options for Reform	213	(12)
Introduction	213	(2)
Options for Reform	215	(5)
The ECB Proposal	220	(3)
Conclusions	223	(2)
Conclusions	225	(4)
Notes	229	(10)
References	239	(22)
Index	261