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The Monetary Policies of the European Central Bank and the Euro's (Mal)Performance: A Stability-Oriented Assessment

  • Jörg Bibow

    (Levy Economics Institute)

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    The stability-oriented macroeconomic framework established in the Maastricht and Amsterdam Treaties on European Union (TEU), especially the unparalleled status of independence and peculiar mandate of the European Central Bank (ECB), were promised to virtually guarantee price stability and a "strong" euro. Actual developments have shattered these hopes in a rather drastic way. Despite the dismal monetary developments, conventional wisdom holds that neither the Maastricht regime nor the ECB might possibly be at fault. Yet, the euro's performance over 2000–01 is generally seen as a puzzle. This paper assesses the ECB's role in relation to the euro's (mal-) performance, explores the institutional setting and traditions behind the ECB's conduct, and scrutinizes the rationale that inspired its interest rate policies.

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    Paper provided by EconWPA in its series Macroeconomics with number 0109004.

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    Length: 10 pages
    Date of creation: 28 Sep 2001
    Date of revision:
    Handle: RePEc:wpa:wuwpma:0109004
    Note: Type of Document - Adobe Acrobat PDF; prepared on IBM PC; to print on PostScript; pages: 10; figures: included
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    4. Lorenzo Bini Smaghi & Claudio Casini, 2000. "Monetary and Fiscal Policy Co-operation: Institutions and Procedures in EMU," Journal of Common Market Studies, Wiley Blackwell, vol. 38(3), pages 375-391, 09.
    5. Hoffmann, Johannes, 1998. "Problems of inflation measurement in Germany," Discussion Paper Series 1: Economic Studies 1998,01e, Deutsche Bundesbank, Research Centre.
    6. Bibow, Jorg, 1998. "On Keynesian Theories of Liquidity Preference," The Manchester School of Economic & Social Studies, University of Manchester, vol. 66(2), pages 238-73, March.
    7. Philip Arestis & Kevin McCauley & Malcolm Sawyer, 2000. "An Alternative Stability Pact for the European Union," Economics Working Paper Archive wp_296, Levy Economics Institute.
    8. Philip Arestis & Malcolm Sawyer, 2001. "Will The Euro Bring Economic Crisis to Europe?," Economics Working Paper Archive wp_322, Levy Economics Institute.
    9. Willem H. Buiter, 1999. "Alice in Euroland," LSE Research Online Documents on Economics 20226, London School of Economics and Political Science, LSE Library.
    10. Kenen,Peter B., 1995. "Economic and Monetary Union in Europe," Cambridge Books, Cambridge University Press, number 9780521558839, June.
    11. 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.
    12. Issing, Otmar, 1997. "Monetary targeting in Germany: The stability of monetary policy and of the monetary system," Journal of Monetary Economics, Elsevier, vol. 39(1), pages 67-79, June.
    13. Jorg Bibow, 2000. "On exogenous money and bank behaviour: the Pandora's box kept shut in Keynes' theory of liquidity preference?," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 7(4), pages 532-568.
    14. Michael J. Artis & Marco Buti, 2000. "Close to Balance or in Surplus. A Policy Maker’s Guide to the Implementation of the Stability and Growth Pact," EUI-RSCAS Working Papers 28, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
    15. 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.
    16. Eichengreen, Barry, 2000. "The Euro One Year On," Journal of Policy Modeling, Elsevier, vol. 22(3), pages 355-368, May.
    17. Jörg Bibow, 2001. "On the 'Burden' of German Unification: The Economic Consequences of Messrs. Waigel and Tietmeyer," Macroeconomics 0106004, EconWPA.
    18. Ugo Marani & Carlo Altavilla, 1999. "The Monetary Policy of the European Central Bank and the Euro-US Dollar Exchange Rate," Working Papers Department of Economics ces9923, KU Leuven, Faculty of Economics and Business, Department of Economics.
    19. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
    20. 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.
    21. Summers, Lawrence, 1991. "How Should Long-Term Monetary Policy Be Determined? Panel Discussion," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 23(3), pages 625-31, August.
    22. 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.
    23. Jörg Bibow, 2001. "Reflections on the Current Fashion For Central Bank Independence," Macroeconomics 0108004, EconWPA.
    24. Laurence Ball, 1999. "Aggregate demand and Long-Run Unemployment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 30(2), pages 189-252.
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