The (Home) Bias of European Central Bankers: New Evidence Based on Speeches

Abstract

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Adding rooms onto a house we love: Central banking after the global financial crisis

“…However, political psychologists with access to political leaders’ speeches and private notes have found surprising congruence between public and private speech (Renshon ; Dyson and Raleigh ). Researchers have relied upon public speeches to make ‘cognitive maps’ of individual central bankers’ beliefs and their evolution over time (van Esch and de Jong ; Bennani ), and central bankers themselves claim such congruence (Bernanke ; Bennani and Neuenkirch ; Rajan ). Moreover, as our primary interest is in broad ideational trends in the central banking community, it seems reasonable to turn to public speech acts to identify these trends.…”

“…That is, we draw on the Bank for International Settlements (BIS) database of 13,586 speeches given by central bankers worldwide from 1997 to 2017 ( Figure 1) to conduct both quantitative and qualitative text analysis. 1 It is a rich trove of data, one that has increasingly been mined by scholars using automated text analytic techniques (Fontan et al 2016;Bennani and Neuenkirch 2017;van Esch and de Jong 2019). This line of work dovetails with a broader interest by academics and central bankers in using quantitative content analysis to study central bank-related themes (Schonhardt-Bailey 2013;Bholat et al 2015;Golub et al 2015;Moschella and Pinto 2018).…”

National culture trumps EU socialization: the European central bankers’ views of the euro crisis

“…This suggests that not the ECB but the governors' domestic economic culture will be the dominant determinant of their economic worldview. A series of recent papers provides empirical evidence to support this view (Bennani and Neuenkirch 2017;De Jong and Van Esch 2015;cf. De Jong 2002;Van Esch and De Jong 2013).…”

“…Moreover, European central bankers have been portrayed as the prototypical example of an epistemic community within which a farreaching consensus on economic and monetary views exists (McNamara 1998;Verdun 1999Verdun , 2000. Yet, on the other hand, several scholars have argued that the governors' national economic culture and identity trump the effects of European socialization on their policy views (Bennani and Neuenkirch 2017;Brunnermeier et al 2016;De Jong and Van Esch 2015;Van Esch and De Jong 2013). Studying the economic and monetary views of European central bank governors will therefore shed light on the issue of EU socialization and the conditions under which this is likely to occur.…”

The Monetary Policy of the ECB: Caring for the Weakest Links

“…8 The interest rates that the individual euro area countries prefer, i.e. the interest rates that the national governors would like to set if they could still conduct 6 When analyzing speeches delivered by members of the Governing Council, Bennani and Neuenkirch (2017) find that after the financial crisis divergent national economic conditions are the main driver of a home bias. 7 The ECB publishes minutes of the Governing Council's meetings since 2015.…”