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Assessing the ECB's Performance since the Global Slowdown: A Structural Policy Bias Coming Home to Roost?

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  • Jorg Bibow
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    Abstract

    This paper assesses the ECB's performance, which the author finds to be seriously lacking but which is of paramount importance to understanding euroland's ongoing stagnation and fragility. A main finding is that the series of policy blunders which characterized the bank's conduct features a bias. Institutions as well as personalities appear to be behind the bank's tendency to err systematically in one direction. Curiously, this bias is adverse not only to growth, but to price stability. The author shows that viewing the ECB through inflation-targeting lenses is very misleading, since that view does not reflect the bank's perspective at all, and that standard Taylor rule exercises are superfluous. The ECB's words and deeds may be far more consistent than is widely held, without making them any less detrimental to economic performance.

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    File URL: http://www.levyinstitute.org/pubs/wp409.pdf
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    Bibliographic Info

    Paper provided by Levy Economics Institute in its series Economics Working Paper Archive with number wp_409.

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    Date of creation: Jul 2004
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    Handle: RePEc:lev:wrkpap:wp_409

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    1. Olivier J. Blanchard & Lawrence H. Summers, 1986. "Hysteresis And The European Unemployment Problem," NBER Chapters, in: NBER Macroeconomics Annual 1986, Volume 1, pages 15-90 National Bureau of Economic Research, Inc.
    2. Jörg Bibow, 2001. "Reflections on the Current Fashion For Central Bank Independence," Macroeconomics 0108004, EconWPA.
    3. Ben S. Bernanke & Frederic S. Mishkin, 1997. "Inflation Targeting: A New Framework for Monetary Policy?," NBER Working Papers 5893, National Bureau of Economic Research, Inc.
    4. Jorg Bibow, 2002. "What has Happened to Monetarism? An Investigation into the Keynesian Roots of Milton Friedman's Monetary Thought and Its Apparent Monetarist Legacies," Economics Working Paper Archive wp_347, Levy Economics Institute.
    5. Philip Arestis & Malcolm Sawyer, 2002. "Can Monetary Policy Affect The Real Economy?," Macroeconomics 0209012, EconWPA.
    6. Philip Arestis & Kevin McCauley & Malcolm Sawyer, 2000. "An Alternative Stability Pact for the European Union," Economics Working Paper Archive wp_296, Levy Economics Institute.
    7. Richard Clarida & Jordi Gali & Mark Gertler, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," NBER Working Papers 7147, National Bureau of Economic Research, Inc.
    8. Jörg Bibow, 2004. "Investigating the Intellectual Origins of Euroland’s Macroeconomic Policy Regime: Central Banking Institutions and Traditions in West Germany After the War," Method and Hist of Econ Thought 0405005, EconWPA.
    9. Joerg Bibow, 2003. "Is Europe Doomed to Stagnation? An Analysis of the Current Crisis and Recommendations for Reforming Macroeconomic Policymaking in Euroland," General Economics and Teaching 0306002, EconWPA.
    10. George A. Akerlof & William R. Dickens & George L. Perry, 1996. "The Macroeconomics of Low Inflation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(1), pages 1-76.
    11. Richard J. Cebula & Ira S. Saltz, 1997. "Federal Government Budget Deficits and Real Long-Term Interest Rates in the United States: An Alternative Perspective," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 133(I), pages 19-27, March.
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    1. Why a Dual Mandate is Essential
      by Mainly Macro in Mainly Macro on 2013-04-14 16:39:00
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    Cited by:
    1. Jorg Bibow, 2005. "Refocusing the ECB on Output Stabilization and Growth through Inflation Targeting?," Economics Working Paper Archive wp_425, Levy Economics Institute.
    2. Joreg Bibow, 2005. "Refocusing the ECB on Output Stabilization and Growth through Inflation Targeting?," Macroeconomics 0507017, EconWPA.
    3. Jorg Bibow, 2005. "Bad for Euroland, Worse for Germany-The ECB's Record," Macroeconomics 0511018, EconWPA.
    4. Jorg Bibow, 2005. "Europe’s Quest for Monetary Stability: Central Banking Gone Astray," Macroeconomics 0508029, EconWPA.
    5. Jorg Bibow, 2005. "Bad for Euroland, Worse for Germany: The ECB's Record," Economics Working Paper Archive wp_429, Levy Economics Institute.
    6. Jorg Bibow, 2005. "Europe's Quest for Monetary Stability: Central Banking Gone Astray," Economics Working Paper Archive wp_428, Levy Economics Institute.

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