The European Central Bank: reshaping monetary politics in Europe

Alesina, Alberto; Grilli, Vittorio; Bofinger, Peter; Spaventa, Luigi

doi:10.1017/cbo9780511895876.004

Cited by 76 publications

(58 citation statements)

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“…Some contributions consider differences in preferences, in the structure of member economies, or in shocks. For instance, Alesina and Grilli (1992), Montoro (2007), and Riboni and Ruge-Murcia (2010) focus on differences in inflation aversion among committee members. Aksoy et al (2002), Hefeker (2003), and Arnold (2006) emphasise structural differences across countries.…”

Section: Similar Differences Have Been Documented For the Federal Resmentioning

confidence: 99%

Behind closed doors: Revealing the ECB's decision rule

Hayo

Méon

2013

Journal of International Money and Finance

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This paper aims at discovering the decision rule the Governing Council of the ECB uses to set interest rates. We construct a Taylor rule for each member of the council and for the euro area as a whole, and aggregate the interest rates they produce using several classes of decision-making mechanisms: chairman dominance, bargaining, consensus, voting, and voting with a chairman. We test alternative scenarios in which individual members of the council pursue either a national or a federal objective. We then compare the interest-rate path predicted by each scenario with the observed euro area's interest rate. We find that scenarios in which all members of the Governing Council are assumed to pursue Euro-area-wide objectives are dominated by scenarios in which decisions are made collectively by a council consisting of members pursuing national objectives. The best-performing scenario is the one in which individual members of the Governing Council follow national objectives, bargain over the interest rate, and their weights are based on their country's share of the zone's GDP. Behind closed doors: Revealing the ECB's Decision RuleAbstract: This paper aims at discovering the decision rule the Governing Council of the ECB uses to set interest rates. We construct a Taylor rule for each member of the council and for the euro area as a whole, and aggregate the interest rates they produce using several classes of decision-making mechanisms: chairman dominance, bargaining, consensus, voting, and voting with a chairman. We test alternative scenarios in which individual members of the council pursue either a national or a federal objective. We then compare the interest-rate path predicted by each scenario with the observed euro area's interest rate. We find that scenarios in which all members of the Governing Council are assumed to pursue Euro-area-wide objectives are dominated by scenarios in which decisions are made collectively by a council consisting of members pursuing national objectives. The best-performing scenario is the one in which individual members of the Governing Council follow national objectives, bargain over the interest rate, and their weights are based on their country's share of the zone's GDP.

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Section: Similar Differences Have Been Documented For the Federal Resmentioning

confidence: 99%

Behind closed doors: Revealing the ECB's decision rule

Hayo

Méon

2013

Journal of International Money and Finance

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“…Some of the basic literature is collected in: Persson and Tabellini, eds., 1994; for the most extensive treatment, see : Cukierman 1992. vii. Alesina and Grilli 1993. viii. Among the best of these is Alesina and Summers 1993.…”

Section: Notesmentioning

confidence: 99%

“…Lohmann 1994. xxvi. Alesina and Grilli 1993;Eichengreen 1992, 38 ff. xxvii. Although the focus of this analysis is on the organization of the political economy, other factors may have contributed to Germany's good inflation record, including the strong growth of the economy and a more general cultural aversion to inflation born of the experience of hyperinflation in the 1920s.…”

Section: Notesmentioning

confidence: 99%

Mixed Signals: Central Bank Independence, Coordinated Wage Bargaining, and European Monetary Union

Hall¹,

Franzese²

1998

Int Org

494

196

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Plans for the European Monetary Union (EMU) are based on the conventional postulate that increasing the independence of the central bank can reduce inflation without any real economic effects. However, the theoretical and empirical bases for this claim rest on models of the economy that make unrealistic information assumptions and omit institutional variables other than the central bank. When signaling problems between the central bank and other actors in the political economy are considered, we find that the character of wage bargaining conditions the impact of central bank independence by rendering the signals between the bank and the bargainers more or less effective. Greater central bank independence can reduce inflation without major employment effects where bargaining is coordinated, but it can bring higher levels of unemployment where bargaining is less coordinated. Thus, currency unions like the EMU may require higher levels of unemployment to control inflation than their proponents envisage. They will have costs as well as benefits, and these will be unevenly distributed among and within the member nations, depending on the changes they induce in the status of the bank and of wage coordination.

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“…In other words, a superior outcome can be achieved by adjusting the rate of inflation (central bank's choice variable) in accordance with the nature and magnitude of the mentioned shock. Alesina and Grilli (1992) combine Barro and Gordon's struc ture with Rogoff's idea to analyze in what circumstances it would be optimal for a country to surrender monetary autonomy by en tering a monetary union. Broadly speaking, their model rests on a cost-benefit analysis directly linked to the output stabilization -in flation bias tradeoff.…”

Section: Introductionmentioning

confidence: 99%

Political uncertainty and monetary unions

Gonçalves

2004

Brazilian Review of Econometrics

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The purpose of this article is to provide a political economy rationale that helps explain why some non-central European economies, fe aturing highly id iosyncratic disturbances and apparently low inflation bias inefficiencies, seem so eager to enter the European Monetary Union (EMU). The main message from the paper is that because these economies normally display a high degree of do mestic political uncertainty, the "economic costs" arising from the decision to surrender monetary policy may in fact be less severe than the "political costs" of opting out of EMU and then possibly facing undesired infl ation upsurges in the future.Resumo o objetivo deste artigo e Bugerir urn argumento de economia politica que ajude a explicar porque alguns paises perifericos da Europa, que apresentam cheques econ6micos altamente idiossincniticos, e que conseguiram controlar 0 problema do vies infl acionario recentemente, apresentam elevado desejo de in gressar na UnHio Monetaria Europeia. A principal mensagem do artigo e que, devido ao elevado grau de incerteza e polaridade politica presentes nestas econo mias, os "custos economicos!! de se delegar hoje a poli'tica monetaria a um agente externo, podem se mostrar menores que os Hcustos politicos" de nao adesao caso urn governo com preferemcias infl acionarias mais amenas venha a vencer as eleic;6es futuras.

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The European Central Bank: reshaping monetary politics in Europe

Cited by 76 publications

References 0 publications

Behind closed doors: Revealing the ECB's decision rule

Behind closed doors: Revealing the ECB's decision rule

Mixed Signals: Central Bank Independence, Coordinated Wage Bargaining, and European Monetary Union

Political uncertainty and monetary unions

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