Central Banking Systems Compared: The ECB, the Pre-Euro Bundesbank, and the Federal Reserve System

By Emmanuel Apel | Go to book overview

Preface

This book is a comparative study of the newly established European Central Bank (the Eurosystem) with the pre-euro Bundesbank and with the US Federal Reserve System. The institutional framework, the monetary policy strategies and the operational mechanisms of the three central banks are presented and compared, with an assessment of the monetary policy strategy and results of the new European Central Bank (ECB) during its first three years of operation. Although the Eurosystem’s organisation, monetary instruments and primary objective of price stability are very similar to the Bundesbank model, the ‘two-pillar’ monetary policy strategy of the ECB is a departure from the ‘monetary targeting’ strategy adopted by the pre-euro Bundesbank. In fact, the eclectic nature of the ECB’s monetary policy strategy borrows from both the pre-euro Bundesbank’s and the Federal Reserve System’s strategies. The statutory independence of the ECB is very similar to the regime that existed for the pre-euro Bundesbank. However, unlike the Bundesbank and more like the Federal Reserve System, the ECB has numerous legal requirements to communicate, without compromising its independence, with the European Parliament and to engage in a dialogue with other EU bodies. Like the pre-euro Bundesbank but unlike the US central bank, the ECB refuses to publish the minutes of its Governing Council or to publish the vote of the Governing Council - or even the results of the vote whilst keeping the voting patterns of the members secret. Following the tradition of the pre-euro Bundesbank, the ECB, initially in early 1999, took the financial markets by surprise in terms of the timing of the monetary policy changes. More recently, after having been much criticised for its confusing, and at times contradictory, public statements, the ECB seems to be preparing the market for monetary policy changes, in line with the strategy of the Federal Reserve System. The Eurosystem is a central bank whose organisation and monetary policy strategy will evolve over time, just as the Federal Reserve System has evolved over the past 90 years. Already, the first pillar of the ECB monetary policy strategy (the reference value of the broad monetary aggregate) is becoming less important and will probably be formally abandoned in the near future, just as some current

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Central Banking Systems Compared: The ECB, the Pre-Euro Bundesbank, and the Federal Reserve System
Table of contents

Table of contents

  • Title Page iii
  • Contents vii
  • Illustrations ix
  • Abbreviations and Acronyms xii
  • Preface xiv
  • 1 - Historical Background and Basic Institutional Features 1
  • 2 - Objectives, Independence, Transparency and Accountability 28
  • 3 - Monetary Policy 64
  • 4 - Economic Policy Coordination in the Eurozone 143
  • Appendix 193
  • Notes 195
  • References 205
  • Index 213
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