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On the efficiency-legitimacy trade-off in EMU

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This paper addresses the question whether the process of European monetary integration implies efficiency-legitimacy trade-off. The paper considers that the process of monetary policy delegation to the European Central Bank (ECB), ratified by all European Union (EU) parliaments, was a non-zero-sum game, increasing both the efficiency and the legitimacy of monetary policy in the eurozone. There was however a change in the nature of delegation: the initial principal (EU national governments and/or parliaments) delegated to the agent (the ECB) control over its behaviour in regard to monetary policy. The paper distinguishes two types of constraints for monetary policy: credibility constraints and political constraints. The change in the nature of delegation of monetary policy (tying the hands of the principal) was a means of dealing with credibility constraints. The paper goes on investigating whether, and if so to what extent, the European Parliament (EP) is fit to function as a principal of the ECB as a means of dealing with political constraints. Thus, the paper analyses the European Parliament’s increased involvement in overseeing the Central Bank’s activities, aiming at understanding whether and how that new and special role (an informal institution of dialogue) could affect the trade-off between efficiency and legitimacy in the conduct of eurozone.

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Bibliographic Info

Paper provided by NIPE - Universidade do Minho in its series NIPE Working Papers with number 22/2007.

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Date of creation: 2007
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Handle: RePEc:nip:nipewp:22/2007

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Keywords: Economic and Monetary Union; monetary policy delegation: efficiency and legitimacy; accountability; responsiveness; principal-agent relations; governance.;

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  1. Giavazzi, Francesco & Pagano, Marco, 1986. "The Advantages of Tying One's Hands: EMS Discipline and Central Bank Credibility," CEPR Discussion Papers 135, C.E.P.R. Discussion Papers.
  2. Haan, J. de & Amtenbrink, F. & Eijffinger, S.C.W., 1998. "Accountability of Central Banks: Aspects and Quantification," Discussion Paper 1998-54, Tilburg University, Center for Economic Research.
  3. Bovens, Mark, 2006. "Analysing and Assessing Public Accountability. A Conceptual Framework," European Governance Papers (EUROGOV) 1, CONNEX and EUROGOV networks.
  4. Francisco Torres, 2003. "How efficient is Joint Decision-Making in the EU? Environmental Policies and the Co-Decision Procedure," Working Papers de Economia (Economics Working Papers) 05, Departamento de Economia, Gestão e Engenharia Industrial, Universidade de Aveiro.
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