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Selective Bond Purchases – May the ECB Chose Winners and Losers?

Author

Listed:
  • Bernoth Kerstin

    (Deutsches Institut für Wirtschaftsforschung eV, Berlin, Germany)

  • Dietz Sara

    (Ludwig-Maximilians-Universitat Munchen, Munchen, Germany)

Abstract

The European Central Bank (ECB) is currently facing major challenges. Fragmentation of government bond yields across Member States of the European Economic and Monetary Union, based on different economic and fiscal policies, hampers a uniform transmission of monetary policy. At the same time, climate-related financial risks need to be addressed. In recent years, the ECB is meeting these challenges by making selective bond purchases and deviating from the principle of market neutrality. This study discusses whether such selective interventions by the ECB are justified from economic and legal perspectives. We conclude that choosing winners and losers, discriminating on the grounds of social, economic, environmental, or other grounds is beyond the ECB’s competence and outside of the ECB’s democratic foundation.

Suggested Citation

  • Bernoth Kerstin & Dietz Sara, 2023. "Selective Bond Purchases – May the ECB Chose Winners and Losers?," The Economists' Voice, De Gruyter, vol. 20(1), pages 111-118, June.
    • Handle: RePEc:bpj:evoice:v:20:y:2023:i:1:p:111-118:n:3
    DOI: 10.1515/ev-2023-0026
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    References listed on IDEAS

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    1. Boysen-Hogrefe, Jens, 2017. "Risk assessment on euro area government bond markets – The role of governance," Journal of International Money and Finance, Elsevier, vol. 73(PA), pages 104-117.
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    More about this item

    Keywords

    monetary policy; asset purchases; market neutrality; climate change;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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