Advanced Search
MyIDEAS: Login to save this paper or follow this series

Easy Money through the Back Door: The Markets vs. the ECB

Contents:

Author Info

  • Jörg Bibow

    (Univ of Hamburg & Jerome Levy Econ Inst)

Registered author(s):

    Abstract

    This paper assesses the performance of the European Central Bank (ECB) over the first two years of Europe's new policy regime. The verdict is that the ECB was not actually in charge, as the markets took over and imposed easy money on the euro zone. It is argued that the causes for the ECB's loss of effective control over the currency and monetary stance lie partly in the low-growth legacies of unsound macro policies inflicted upon Europe over the 1990s. The ECB made matters worse, though, first by failing to communicate effectively and coherently with financial market participants and, second, by playing against the markets' dominant theme: growth. This resulted in a time-inconsistency problem: attempts to prop up the euro through narrowing the current interest rate spread vis-à-vis the U.S. dollar were perceived as risking the euro zone's growth prospects and hence the sustainability of tighter money in the future. Under such conditions, interest rate hikes might then weaken rather than strengthen the currency. A more balanced and proactive attitude toward growth, and medium-term orientation as regards inflation, might have both reduced inflation in the short run and improved growth in the longer run. The recent short run of impressive GDP and employment growth spurred by easy money embarrasses the structural myth, and underlines that the ECB was not actually in charge.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://128.118.178.162/eps/mac/papers/0103/0103004.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by EconWPA in its series Macroeconomics with number 0103004.

    as in new window
    Length: 36 pages
    Date of creation: 21 Mar 2001
    Date of revision:
    Handle: RePEc:wpa:wuwpma:0103004

    Note: Type of Document - Adobe Acrobat PDF; prepared on IBM PC; to print on PostScript; pages: 36; figures: included
    Contact details of provider:
    Web page: http://128.118.178.162

    Related research

    Keywords:

    Find related papers by JEL classification:

    This paper has been announced in the following NEP Reports:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Kenen,Peter B., 1995. "Economic and Monetary Union in Europe," Cambridge Books, Cambridge University Press, number 9780521558839, April.
    2. Giancarlo Corsetti & Paolo Pesenti, 1999. "Stability, Asymmetry, and Discontinuity: The Launch of European Monetary Union," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 30(2), pages 295-372.
    3. repec:sae:niesru:v:152:y::i:1:p:76-96 is not listed on IDEAS
    4. Jorg Bibow, 2000. "On exogenous money and bank behaviour: the Pandora's box kept shut in Keynes' theory of liquidity preference?," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 7(4), pages 532-568.
    5. Charles Freedman, 1995. "The role of monetary conditions and the monetary conditions index in the conduct of policy [speech]," Bank of Canada Review, Bank of Canada, vol. 1995(Autumn), pages 53-59.
    6. Silke Tober, 2000. "Geldpolitik in besonderer Verantwortung für den Aufschwung," DIW Wochenbericht, DIW Berlin, German Institute for Economic Research, vol. 67(47), pages 801-806.
    7. Wynne Godley & L. Randall Wray, . "Can Goldilocks Survive?," Economics Policy Note Archive 99-4, Levy Economics Institute.
    8. Jesus Ferreiro & Felipe Serrano, 2001. "The Spanish Labour Market: Reforms and consequences," International Review of Applied Economics, Taylor & Francis Journals, vol. 15(1), pages 31-53.
    9. Alison Cottrell, 2000. "Softer Euro, Stronger Europe," Journal of Common Market Studies, Wiley Blackwell, vol. 38(s1), pages 77-80, 09.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Jorg Bibow, 2002. "The Monetary Policies of the European Central Bank and the Euro's (Mal-)Performance: A stability-oriented assessment," International Review of Applied Economics, Taylor & Francis Journals, vol. 16(1), pages 31-50.
    2. Jorg Bibow, 2003. "On the 'burden' of German unification," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 56(225), pages 137-169.
    3. Eckhard Hein, 2002. "Monetary policy and wage bargaining in the EMU: restrictive ECB policies, high unemployment, nominal wage restraint and inflation above the target," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 55(222), pages 299-337.
    4. Jörg Bibow, 2001. "The Monetary Policies of the European Central Bank and the Euro's (Mal)Performance: A Stability-Oriented Assessment," Macroeconomics 0109004, EconWPA.
    5. Jörg Bibow, 2001. "On the 'Burden' of German Unification: The Economic Consequences of Messrs. Waigel and Tietmeyer," Macroeconomics 0106004, EconWPA.
    6. 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.
    7. Jorg Bibow, 2005. "Bad for Euroland, Worse for Germany: The ECB's Record," Economics Working Paper Archive wp_429, Levy Economics Institute.
    8. Jorg Bibow, 2003. "On the 'burden' of German unification," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 56(225), pages 137-169.
    9. Jörg Bibow, 2001. "Reflections on the Current Fashion For Central Bank Independence," Macroeconomics 0108004, EconWPA.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpma:0103004. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.