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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

    (Levy Economics Institute)

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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://128.118.178.162/eps/mac/papers/0407/0407026.pdf
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    Bibliographic Info

    Paper provided by EconWPA in its series Macroeconomics with number 0407026.

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    Length: 80 pages
    Date of creation: 21 Jul 2004
    Date of revision:
    Handle: RePEc:wpa:wuwpma:0407026

    Note: Type of Document - pdf; pages: 80
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    Web page: http://128.118.178.162

    Related research

    Keywords: Policy inconsistencies; EMU; Inflation Targeting; Taylor rules;

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    References

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    1. 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.
    2. Jorg Bibow, 2004. "Investigating the Intellectual Origins of Euroland's Macroeconomic Policy Regime: Central Banking Institutions and Traditions in West Germany After the War," Economics Working Paper Archive wp_406, Levy Economics Institute.
    3. 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.
    4. Buiter, Willem H & Corsetti, Giancarlo & Roubini, Nouriel, 1992. "`Excessive Deficits': Sense and Nonsense in the Treaty of Maastricht," CEPR Discussion Papers 750, C.E.P.R. Discussion Papers.
    5. 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.
    6. 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.
    7. 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.
    8. Philip Arestis & Kevin McCauley & Malcolm Sawyer, 2000. "An Alternative Stability Pact for the European Union," Macroeconomics 0004043, EconWPA.
    9. Jorg Bibow, 2002. "The Markets versus the ECB, and the EURO's Plunge," Eastern Economic Journal, Eastern Economic Association, vol. 28(1), pages 45-57, Winter.
    10. 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.
    11. Philip Arestis & Malcolm Sawyer, 2002. "Can Monetary Policy Affect The Real Economy?," Macroeconomics 0209012, EconWPA.
    12. 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.
    13. Cecchetti, Stephen G, 2000. "Making Monetary Policy: Objectives and Rules," Oxford Review of Economic Policy, Oxford University Press, vol. 16(4), pages 43-59, Winter.
    14. Alan S. Blinder, 1999. "Central Banking in Theory and Practice," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522608.
    15. Jörg Bibow, 2001. "Reflections on the Current Fashion For Central Bank Independence," Macroeconomics 0108004, EconWPA.
    16. 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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    Citations

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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. Jorg Bibow, 2005. "Bad for Euroland, Worse for Germany-The ECB's Record," Macroeconomics 0511018, EconWPA.
    3. Jorg Bibow, 2005. "Europe's Quest for Monetary Stability: Central Banking Gone Astray," Economics Working Paper Archive wp_428, Levy Economics Institute.
    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. Joreg Bibow, 2005. "Refocusing the ECB on Output Stabilization and Growth through Inflation Targeting?," Macroeconomics 0507017, EconWPA.

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