IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/4016.html
   My bibliography  Save this paper

The European Central Bank: A Bank or a Monetary Policy Rule

Author

Listed:
  • David Folkerts-Landau
  • Peter M. Garber

Abstract

A European central banking institution will be an essential feature of the final stage of the European Economic and Monetary Union. The EC Committee of Central Bank Governors has recently produced a Draft Statute of the European System of Central Banks and of the European Central Bank. The draft Statute mandates the maintenance of price stability as the explicit primary objective of the ECB. and the necessary monetary functions and operations of the system are defined in accordance with standard practice. The maintenance of a stable financial and payments system, however. is not an explicit objective of the ECB. and only limited banking functions are admitted as one of the system's tasks. The draft Statute clearly subscribes to a "narrow" concept of the System of Central Banks with a single objective-monetary stability-rather than a "broad" concept with the additional objective of financial-market stability. In this paper we examine the consequences of a "narrow" central banking system for Community financial markets, We conclude that in the absence of such banking functions it will be necessary to slow or even prevent the ongoing development of Community-wide liquid. securitized financial markets, supported by a large-volume wholesale payments system. Instead, the historically prevalent bank-intermediated financial system will have to be maintained to lower the likelihood of liquidity crises that demand central bank intervention.

Suggested Citation

  • David Folkerts-Landau & Peter M. Garber, 1992. "The European Central Bank: A Bank or a Monetary Policy Rule," NBER Working Papers 4016, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:4016
    Note: IFM
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w4016.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Peter Garber & Steven Weisbrod, 1990. "Banks in the Market for Liquidity," NBER Working Papers 3381, National Bureau of Economic Research, Inc.
    2. Grossman, Sanford J & Miller, Merton H, 1988. " Liquidity and Market Structure," Journal of Finance, American Finance Association, vol. 43(3), pages 617-637, July.
    3. William Haraf, 1988. "Restructuring Banking & Financial Services in America," Books, American Enterprise Institute, number 917739, September.
    4. Thomas J. Sargent & Neil Wallace, 1981. "The real bills doctrine vs. the quantity theory: a reconsideration," Staff Report 64, Federal Reserve Bank of Minneapolis.
    5. Charles Goodhart, 1988. "The Evolution of Central Banks," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262570734, December.
    6. Sargent, Thomas J & Wallace, Neil, 1982. "The Real-Bills Doctrine versus the Quantity Theory: A Reconsideration," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1212-1236, December.
    7. Paul A. Volcker, 1984. "The Federal Reserve position on restructuring of financial regulation responsibilities," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Jul, pages 547-557.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Winkler, Adalbert, 2013. "Der lender of last resort vor Gericht," Frankfurt School - Working Paper Series 206, Frankfurt School of Finance and Management.
    2. Vincent Bignon & Marc Flandreau & Stefano Ugolini, 2012. "Bagehot for beginners: the making of lender‐of‐last‐resort operations in the mid‐nineteenth century," Economic History Review, Economic History Society, vol. 65(2), pages 580-608, May.
    3. Sargent, Thomas J, 1982. "Beyond Demand and Supply Curves in Macroeconomics," American Economic Review, American Economic Association, vol. 72(2), pages 382-389, May.
    4. van Eeghen, Piet-Hein, 2021. "Funding money-creating banks: Cash funding, balance sheet funding and the moral hazard of currency elasticity," International Review of Financial Analysis, Elsevier, vol. 76(C).
    5. Sanford J. Grossman & Laurence Weiss, 1982. "A Transactions Based Model of the Monetary Transmission Mechanism: Part 1," NBER Working Papers 0973, National Bureau of Economic Research, Inc.
    6. Eric Tymoigne, 2006. "Asset Prices, Financial Fragility, and Central Banking," Economics Working Paper Archive wp_456, Levy Economics Institute.
    7. John A. James & David F. Weiman, 2010. "From Drafts to Checks: The Evolution of Correspondent Banking Networks and the Formation of the Modern U.S. Payments System, 1850-1914," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(2-3), pages 237-265, March.
    8. Stanley Fischer, 1982. "A Framework for Monetary and Banking Analysis," NBER Working Papers 0936, National Bureau of Economic Research, Inc.
    9. Edward J. Green, 1999. "Money and debt in the structure of payments," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 23(Spr), pages 13-29.
    10. Eaton, Jonathan, 1986. "Lending with costly enforcement of repayment and potential fraud," Journal of Banking & Finance, Elsevier, vol. 10(2), pages 281-293, June.
    11. Docherty, Peter & Wang, Gehong, 2010. "Using synthetic data to evaluate the impact of RTGS on systemic risk in the Australian payments system," Journal of Financial Stability, Elsevier, vol. 6(2), pages 103-117, June.
    12. Sargent, Thomas J. & Wallace, Meil, 1983. "A model of commodity money," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 163-187.
    13. Marco A. Espinosa-Vega & Steven Russell, 1998. "A public finance analysis of multiple reserve requirements," FRB Atlanta Working Paper 98-1, Federal Reserve Bank of Atlanta.
    14. Winkler, Adalbert, 2014. "The lender of last resort in court," Frankfurt School - Working Paper Series 207, Frankfurt School of Finance and Management.
    15. Goodhart, Charles A.E. & Huang, Haizhou, 2005. "The lender of last resort," Journal of Banking & Finance, Elsevier, vol. 29(5), pages 1059-1082, May.
    16. Harrison Hong & Terence Lim & Jeremy C. Stein, 2000. "Bad News Travels Slowly: Size, Analyst Coverage, and the Profitability of Momentum Strategies," Journal of Finance, American Finance Association, vol. 55(1), pages 265-295, February.
    17. Alberto Giovannini, 1990. "European Monetary Reform: Progress and Prospects," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(2), pages 217-292.
    18. Edward J. Green & Richard M. Todd, 2001. "Thoughts on the Fed's role in the payment system," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 25(Win), pages 12-27.
    19. Loïc Sauce, 2017. "Market process(es) and (un)knowledge," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 30(3), pages 305-321, September.
    20. Yue Zhao & Difang Wan, 2018. "Institutional high frequency trading and price discovery: Evidence from an emerging commodity futures market," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 38(2), pages 243-270, February.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:4016. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.