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National central banks and the governance of the European system of central banks

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  • Martin F. Hellwig

    (Max Planck Institute for Research on Collective Goods, Bonn)

Abstract

The paper analyses the role of national central banks (NCBs) in the governance of the European System of Central Banks (ESCB). NCBs are the owners of the European Central Bank (ECB), and their governors dominate the ECB’s Governing Council, but in monetary policy operations, NCBs are subordinated to the ECB. The dominance of NCB governors has materially affected Governing Council decisions on relations between NCBs and the ECB, allowing the NCBs to maintain some of their erstwhile glory, sometimes in contradiction to the primary law. Examples involve the monetary funding of investments declared as non-monetary, violations of Treaty provisions for the allocation of income from monetary policy operations, and accounting rules that obfuscate the boundary between ECB-subordinate and independent activities of NCBs. The net effect of these developments is to enlarge the domain of NCB activities.

Suggested Citation

  • Martin F. Hellwig, 2024. "National central banks and the governance of the European system of central banks," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2024_07, Max Planck Institute for Research on Collective Goods.
    • Handle: RePEc:mpg:wpaper:2024_07
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    References listed on IDEAS

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    3. Sinn, Hans-Werner, 2017. "The Euro Trap: On Bursting Bubbles, Budgets, and Beliefs," OUP Catalogue, Oxford University Press, number 9780198791447, Decembrie.
    4. Acharya, Viral V. & Steffen, Sascha, 2015. "The “greatest” carry trade ever? Understanding eurozone bank risks," Journal of Financial Economics, Elsevier, vol. 115(2), pages 215-236.
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    More about this item

    Keywords

    European Monetary Union; European System of Central Banks; Governance of the Eurosystem; ANFA; ELA; PSPP; Central-Bank Accounting and Balance Sheets;
    All these keywords.

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations

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