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

By Jakob De Haan | Go to book overview

independent central bank can lastingly defend monetary stability against a ‘society of excessive demands’. In other words, every society ultimately gets the rate of inflation it deserves and basically wants. Of course, this statement does not mean that institutions are irrelevant or that central bank independence is unimportant. Precisely the contrary holds true: in principle, resistance to making the central bank an independent institution with the single goal of price stability always reflects the intention of reserving access to influencing monetary policy whenever a currency loses value. Governments seeking re-election often have an incentive to achieve short-term benefits through inflation without considering its long-term costs. In view of the temptations inherent in the political process, a society can signal its determination to safeguard the stability of its money only by choosing the appropriate institutional arrangement. In this context, the independence of the central bank is a necessary, but not sufficient, condition.


References

b
Barro, R.J. and Gordon, D.B. (1983) ‘Rules, Discretion and Reputation in a Model of Monetary Policy’, Journal of Monetary Economics 12:101-21.

c
Capie, F. (1997) ‘Central Bank Statutes—the Historical Dimension’, in Die Bedeutung der Unabhängigkeit der Notenbank für Glaubwürdigkeit der europäischen Geldpolitik, Volkswirtschaftliche Tagung 1997 der Oesterreichischen Nationalbank, Vienna, 13-14 May, 43-55.
Cukierman, A. (1992) Central Bank Strategy, Credibility, and Independence: Theory and Evidence, Cambridge, Mass.: MIT Press.

d
Dornbusch, R., Favero, C.A. and Giavazzi, F. (1998) ‘A Red Letter Day?’ , Paper delivered at the BIS and CEPR convention ‘Asset Prices and Monetary Policy’, Basle, 26-27 January, 1998.

e
Eijffinger, S.C.W. and de Haan, J. (1996) ‘The Political Economy of Central-Bank Independence’, Princeton Special Papers in International Economics, No. 19.
EMI (1997) The Single Monetary Policy in Stage Three-Elements of the Monetary Policy Strategy of the ESCB, Frankfurt am Main: European Monetary Institute, February.

f
Feldstein, M. (1997) The Political Economy of the European Economic and Monetary Union: Political Sources of an Economic Liability, Working Paper No. 6150, National Bureau of Economic Research.

i
IMF (1997) World Economic Outlook, International Monetary Fund, Washington, D.C: October.

j
Jensen, H. (1997) ‘Credibility of Optimal Monetary Delegation’, American Economic Review 87(5):911-20.

k
King, M. (1997a) ‘Roundtable on Lessons of European Monetary Integration for the International Monetary System’, in Masson, P.R., Krueger, T.H. and Turtelboom, B.G. (eds), EMU and the International Monetary System, International Monetary Fund, Proceedings of a conference held in Washington, D.C., 17-18 March.
——(1997b): ‘The Inflation Target Five Years On’, Bank of England Quarterly Bulletin November.

l
Lamfalussy, A. (1997) ‘The European Central Bank: Independent and Accountable’, in Die Bedeutung der Unabhängigkeit der Notenbank für die Glaubwürdigkeit der

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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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