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ECB Credibility and Transparency

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  • Petra M. Geraats

Abstract

This paper argues that ECB credibility in delivering price stability is being progressively eroded; this problem could be overcome by embracing greater transparency especially about the ECB's objectives, macroeconomic forecasts and decision-making. During the ECB's first decade, average inflation in the euro area has been low, but it has failed to meet the ECB's criterion of below but close to 2% over the medium term. Although this could be attributed to unanticipated shocks, the analysis in this paper points to some structural shortcomings. In particular, there has been an upward trend in medium and long term inflation expectations in the euro area, which have even reached over 2%, and the credibility of the ECB achieving price stability in the medium term has gradually eroded to critically low levels. In addition, there is evidence that medium and long term inflation expectations are negatively affected by the inflation experience of the euro area. However, this paper argues that these problems could be overcome embracing by greater transparency, especially about the ECB's objectives, macroeconomic forecasts and decision-making.

Suggested Citation

  • Petra M. Geraats, 2008. "ECB Credibility and Transparency," European Economy - Economic Papers 2008 - 2015 330, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
  • Handle: RePEc:euf:ecopap:0330
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    File URL: http://ec.europa.eu/economy_finance/publications/pages/publication12714_en.pdf
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    References listed on IDEAS

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    Cited by:

    1. Zsolt Darvas & Valentina Kostyleva, 2011. "The fiscal and monetary institutions of CESEE countries," Working Papers 494, Bruegel.
    2. Klaus Schmidt-Hebbel, 2012. "Fiscal Institutions in Resource-Rich Economies: Lessons from Chile and Norway," Documentos de Trabajo 416, Instituto de Economia. Pontificia Universidad Católica de Chile..
    3. Zsolt Darvas & Valentina Kostyleva, 2011. "Fiscal and Monetary Institutions in Central, Eastern and South-Eastern European Countries," OECD Journal on Budgeting, OECD Publishing, vol. 11(1), pages 147-185.
    4. Klaus Schmidt-Hebbel, 2012. "Fiscal Policy for Commodity Exporting Countries: Chile's Experience," Documentos de Trabajo 415, Instituto de Economia. Pontificia Universidad Católica de Chile..
    5. Ma, Yong & Li, Shushu, 2015. "Bayesian estimation of China's monetary policy transparency: A New Keynesian approach," Economic Modelling, Elsevier, vol. 45(C), pages 236-248.
    6. repec:kap:empiri:v:44:y:2017:i:2:d:10.1007_s10663-016-9316-8 is not listed on IDEAS

    More about this item

    Keywords

    ECB; monetary policy; inflation expectations; Geraats;

    JEL classification:

    • 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

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