The History of the Bundesbank: Lessons for the European Central Bank

By Jakob De Haan | Go to book overview

Notes
1
Interestingly, following the usual approach, the Bundesbank (or, better, the Bank deutscher Länder) would appear to be anything but independent in its early stages as the bank’s decisions were subject to the explicit consent of the Allied Banking Commission, a branch of the Allied High Commission in Germany. However, in spite of the law, the bank operated in a very favourable institutional setting until the formal end of the Allied jurisdiction in 1951 (Berger 1997b).
2
The survey was undertaken by the Mannheim Institute for Praxis Oriented Social Research and is cited in Balkhausen (1992).
3
For example, the Bundesrat declared the Bundesbank law to be zustimmungs-plichtig during the discussion about the change of the law after unification. However, given the position of the Federal Constitutional Court, this cannot be considered legal (Amtenbrink 1999); for a different view, see Lohmann (1998).
4
BbankG 1957, Art. 12: Without prejudice to the performance of its functions, the Deutsche Bundesbank shall be required to support the general economic policy of the Federal government. In exercising the powers conferred on it by this Act, it shall be independent of instructions from the government.
5
An interesting offspring of the conflict models is the ‘theory of optimal central-bank bashing’ (see Waller 1991). If a central bank does not produce the administration’s preferred money-inflation outcome, it might get ‘bashed’. In the future, the chances of the administration being able to get its desired policy will increase the higher its reputation is for bashing.
6
To be fair to these authors, it has to be noted that they employ annual, quarterly and monthly data and that their results are stable across frequencies.
7
Another possibility, pointed out by Berger and Woitek (1997b), is uncertainty with respect to election outcomes. See Section 2.5 for a more detailed discussion of this study.
8
The Bundesbank used, rather arbitrarily, the constant minimum reserve percentages as of January 1974. The formula for the ZBG was as follows: ZBG=C +0.166×SD+0.124×T+0.081×S, where C is cash in circulation, SD is sight deposits, T is time deposits and S is savings accounts.
9
See, for instance, Deutsche Bundesbank (1995:80, 88-9).
10
It is quite interesting that a number of recent studies that have analysed German monetary policy conclude that despite the Bundesbank rhetoric about money growth targeting, German monetary policy is best described as an interest rate policy that sets short-term interest rates to minimise deviations from rational expectations equilibrium values of inflation and real growth. See, e.g., Clarida and Gertler (1997) and Bernanke and Mihov (1997).
11
The aggregates M3 and ZBG have largely developed in a parallel way; therefore, only M3 is reported. Data provided by Helge Berger.
12
This part draws heavily on Boonstra (1997).
13
The index by Dominguez (1997) will be explained in more detail in Section 2.7.
14
As the working paper version is much longer and contains some important findings that are not included in the published version of the paper, we refer to both versions.
15
However, Lang and Welzel claim that setting the dummy equal to zero for 1973 and 1974 (which seems more correct) does not alter their results significantly.
16
In his reply, Vaubel (1997) argues, however, that with the inclusion of the elections of 1990 and 1994, the evidence based on the non-parametric test supports his hypothesis (eleven observations support the hypothesis against four that reject it).
17
Lohmann assigns each council member the party code (ranging from −2 to 3) of the federal or Land government that originally appointed him or her. The

-39-

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The History of the Bundesbank: Lessons for the European Central Bank
Table of contents

Table of contents

  • Title Page iii
  • Contents v
  • Figures viii
  • Tables ix
  • Preface xi
  • Introduction xii
  • 1 - Introductory Remarks on 50 Years of the Bundesbank 1
  • 2 - How Independent Is the Bundesbank Really? 6
  • Notes 39
  • 3 - The Bundesbank’s Reaction to Policy Conflicts 43
  • Notes 63
  • 4 - From Low Inflation to Price Stability in Germany 67
  • Notes 94
  • 5 - Credibly Conservative Monetary Policy and Labour-Goods Market Organisation 97
  • 6 - Monetary Policy of the Ecb 125
  • References 142
  • 7 - The European Central Bank as a New Institution and the Problem of Accountability 143
  • References 155
  • Index 157
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