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Culture Matters: French-German Conflicts on European Central Bank Independence

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  • Femke van Esch

    ()

  • Eelke de Jong

    ()

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    Abstract

    With the Maastricht treaty, the members of the Eurozone agreed on the establishment of a very independent European Central Bank, as well as making their National Central Banks far more independent. However, over the years French political leaders systematically brought forward proposals undermining the ECB's independence, to the dismay of Germany. A pattern that surfaced again during the current sovereign debt crisis and has complicated finding a timely and unified answer to the problems. The article conducts tests of various factors expected to influence the preference for central bank independence. It shows that economic explanations are unable to account for the persistent differences amongst European member-states on this issue. Instead, cultural differences in attitudes, especially a nation's score on the dimension of Power Distance - its acceptance of centralisation of power in a small set of political leaders or institutions - does show a correlation with the different levels of internalisation of the Central Bank independence norm.

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    File URL: http://www.uu.nl/SiteCollectionDocuments/REBO/REBO_USE/REBO_USE_OZZ/11-23.pdf
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    Bibliographic Info

    Paper provided by Utrecht School of Economics in its series Working Papers with number 11-23.

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    Length: 34 pages
    Date of creation: Nov 2011
    Date of revision:
    Handle: RePEc:use:tkiwps:1123

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    Related research

    Keywords: Central Bank Independence; Culture; European Central Bank; Franco- German relations;

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    1. Dyson, Kenneth & Featherstone, Kevin, 1999. "The Road To Maastricht: Negotiating Economic and Monetary Union," OUP Catalogue, Oxford University Press, number 9780198296386, October.
    2. Dyson, Kenneth (ed.), 2002. "European States and the Euro: Europeanization, Variation, and Convergence," OUP Catalogue, Oxford University Press, number 9780199250257, October.
    3. Cukierman Alex, 1992. "Central Bank Strategy, Credibility, And Independance: Theory And Evidence," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 3(4), pages 10, December.
    4. Frank Bohn & Eelke Jong, 2011. "The 2010 euro crisis stand-off between France and Germany: leadership styles and political culture," International Economics and Economic Policy, Springer, vol. 8(1), pages 7-14, April.
    5. Hayo, Bernd, 1998. "Inflation culture, central bank independence and price stability," European Journal of Political Economy, Elsevier, vol. 14(2), pages 241-263, May.
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