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The European Central Bank and the Federal Reserve

Author

Listed:
  • Stephen G. Cecchetti
  • RÛisÌn O'Sullivan

Abstract

In the 4 years of its existence, the European Central Bank (ECB) has made significant contributions to the macroeconomic stability of the euro area. This paper takes a critical look at the ECB and compares its institutional structure, policy framework, and operational procedures with those of the longer-established US central bank. We discuss the implications of various differences between the ECB and the Federal Reserve with a view toward identifying successful elements of the practices of both these institutions. The paper recommends that the ECB abandon the first pillar of its monetary policy strategy that affords a special role to monetary aggregates in the evaluation of financial market conditions. It also suggests that the Federal Reserve should follow the ECB's lead and provide an explicit definition of price stability. Copyright 2003, Oxford University Press.

Suggested Citation

  • Stephen G. Cecchetti & RÛisÌn O'Sullivan, 2003. "The European Central Bank and the Federal Reserve," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 19(1), pages 30-43.
    • Handle: RePEc:oup:oxford:v:19:y:2003:i:1:p:30-43
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    RePEc Biblio mentions

    As found on the RePEc Biblio, the curated bibliography for Economics:
    1. > Political Economy > The Political Economy of the European Union > Economic Policy and Policy-Making in the European Union

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    Cited by:

    1. Christian Bordes & Laurent Clerc, 2007. "Price Stability And The Ecb'S Monetary Policy Strategy," Journal of Economic Surveys, Wiley Blackwell, vol. 21(2), pages 268-326, April.
    2. Kathryn M. E. Dominguez, 2006. "The European Central Bank, the Euro, and Global Financial Markets," Journal of Economic Perspectives, American Economic Association, vol. 20(4), pages 67-88, Fall.
    3. Singleton,John, 2010. "Central Banking in the Twentieth Century," Cambridge Books, Cambridge University Press, number 9780521899093.
    4. Joerg Bibow, 2006. "Inflation Persistence and Tax-Push Inflation in Germany and in the Euro Area: A Symptom of Macroeconomic Mismanagement?," IMK Studies 01-2006, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    5. Chiara Scotti, 2006. "A bivariate model of Fed and ECB main policy rates," International Finance Discussion Papers 875, Board of Governors of the Federal Reserve System (U.S.).
    6. Kirsten Wandschneider & Nikolaus Wolf, 2010. "Shooting on a moving target: explaining European bank rates during the interwar period," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 2(1/2), pages 31-48.

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