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The Monetary Policies of the European Central Bank and the Euro's (Mal)Performance: A Stability-Oriented Assessment

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  • Jörg Bibow

    (Levy Economics Institute)

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    Abstract

    The stability-oriented macroeconomic framework established in the Maastricht and Amsterdam Treaties on European Union (TEU), especially the unparalleled status of independence and peculiar mandate of the European Central Bank (ECB), were promised to virtually guarantee price stability and a "strong" euro. Actual developments have shattered these hopes in a rather drastic way. Despite the dismal monetary developments, conventional wisdom holds that neither the Maastricht regime nor the ECB might possibly be at fault. Yet, the euro's performance over 2000–01 is generally seen as a puzzle. This paper assesses the ECB's role in relation to the euro's (mal-) performance, explores the institutional setting and traditions behind the ECB's conduct, and scrutinizes the rationale that inspired its interest rate policies.

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    Bibliographic Info

    Paper provided by EconWPA in its series Macroeconomics with number 0109004.

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    Length: 10 pages
    Date of creation: 28 Sep 2001
    Date of revision:
    Handle: RePEc:wpa:wuwpma:0109004

    Note: Type of Document - Adobe Acrobat PDF; prepared on IBM PC; to print on PostScript; pages: 10; figures: included
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    Web page: http://128.118.178.162

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    1. W.H. Buiter, 1999. "Alice in Euroland," CEP Discussion Papers dp0423, Centre for Economic Performance, LSE.
    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. De Grauwe, Paul, 2000. "Exchange Rates in Search of Fundamentals: The Case of the Euro-Dollar Rate," CEPR Discussion Papers 2575, C.E.P.R. Discussion Papers.
    4. Laurence Ball, 1999. "Aggregate demand and Long-Run Unemployment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 30(2), pages 189-252.
    5. Bibow, Jorg, 1998. "On Keynesian Theories of Liquidity Preference," The Manchester School of Economic & Social Studies, University of Manchester, vol. 66(2), pages 238-73, March.
    6. Ugo Marani & Carlo Altavilla, 1999. "The Monetary Policy of the European Central Bank and the Euro-US Dollar Exchange Rate," Center for Economic Studies - Discussion papers ces9923, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
    7. Philip Arestis & Malcolm Sawyer, 2001. "Will The Euro Bring Economic Crisis to Europe?," Economics Working Paper Archive wp_322, Levy Economics Institute.
    8. Lorenzo Bini Smaghi & Claudio Casini, 2000. "Monetary and Fiscal Policy Co-operation: Institutions and Procedures in EMU," Journal of Common Market Studies, Wiley Blackwell, vol. 38(3), pages 375-391, 09.
    9. Jeffrey Fuhrer & Brian Madigan, 1994. "Monetary policy when interest rates are bounded at zero," Working Papers 94-1, Federal Reserve Bank of Boston.
    10. Eichengreen, Barry, 2000. "The Euro One Year On," Journal of Policy Modeling, Elsevier, vol. 22(3), pages 355-368, May.
    11. 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.
    12. De Grauwe, Paul, 2000. "Exchange Rates in Search of Fundamentals: The Case of the Euro-Dollar Rate," International Finance, Wiley Blackwell, vol. 3(3), pages 329-56, November.
    13. Lars E.O. Svensson, 2000. "The First Year of the Eurosystem: Inflation Targeting or Not?," NBER Working Papers 7598, National Bureau of Economic Research, Inc.
    14. Arestis, Philip & McCauley, Kevin & Sawyer, Malcolm, 2001. "An Alternative Stability Pact for the European Union," Cambridge Journal of Economics, Oxford University Press, vol. 25(1), pages 113-30, January.
    15. Jörg Bibow, 2001. "Easy Money through the Back Door: The Markets vs. the ECB," Macroeconomics 0103004, EconWPA.
    16. Jörg Bibow, 2001. "On the 'Burden' of German Unification: The Economic Consequences of Messrs. Waigel and Tietmeyer," Macroeconomics 0106004, EconWPA.
    17. Summers, Lawrence, 1991. "How Should Long-Term Monetary Policy Be Determined? Panel Discussion," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 23(3), pages 625-31, August.
    18. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
    19. Issing, Otmar, 1997. "Monetary targeting in Germany: The stability of monetary policy and of the monetary system," Journal of Monetary Economics, Elsevier, vol. 39(1), pages 67-79, June.
    20. Jörg Bibow, 2001. "Reflections on the Current Fashion For Central Bank Independence," Macroeconomics 0108004, EconWPA.
    21. 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.
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