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Recent Posts
- Are ECB’s Greek bond purchases really irrelevant for the private sector?
- Is Greg getting bailed out by his rich uncle?
- Taylor legislation? Rules versus discretion misunderstood
- Partisanship and dismal economics blogging
- Chris Auld’s 18 signs
- The case for negative nominal interest rates and how to attain them: Revisiting the Buiter-Eisler approach
- No Negative Rates in Euroland (yet)
- Reinhart and Rogoff’s coding mistake: Much Ado About Nothing
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(Needless to say, I do not necessarily agree with them or endorse them.)
Tag Archives: European Central Bank
Gavin Davies on the Fed and the ECB
Gavin Davies has an interesting post on his Financial Times blog. It is entitled “Strange bedfellows – the Fed and the ECB” and it discusses the co-movements between the Federal funds rate and the Deutschmark/Euro policy rate since 1987. There seems to be a leader-follower pattern, in the sense that Europe has followed the Fed with a 6-12 month lag. Davies concludes that this “is one of the most well established rules in the analysis of monetary policy making“. This is perhaps a somewhat strong statement, and I would, based on visual inspection (upon which one should be VERY careful), conjecture that most of this correlation is driven by the … Continue reading
Posted in Economics, Macroeconomics, Monetary policy
Tagged European Central Bank, Federal Reserve, Gavin Davies, Inflation targeting, Taylor rule
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ECB, SMP (II): Direct vs. secondary purchases
In my recent post on the ECB’s Securities Market Programme (SMP), I noted that the programme was in violation of the Treaty of the European Union. I based this on Article 21.1, which states: “. . . overdrafts or any other type of credit facility with the ECB or with the national central banks in favour of Union institutions, bodies, offices or agencies, central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of Member States shall be prohibited, as shall the purchase directly from them by the ECB or national central banks of debt instruments.” – Article 21.1 of “ON THE STATUTE … Continue reading
Posted in Economics, Macroeconomics, Monetary policy
Tagged European Central Bank, Securities Markets Programme, Treaty on European Union
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ECB, SMP, ETC. Who pays for what?
After the financial crisis hit in 2008, new acronyms have been appearing at a rapid pace around the globe. These mainly describe the various measures taken by the world’s central banks to offset the troubles caused by the crisis. Many took the form of liquidity provisions to aid “frozen” banking markets. The European Central Bank launched on May 14, 2010 a so-called Securities Market Programme (SMP), under which it – temporarily – allows itself to purchase Euro denominated government bonds. In its decision, the ECB motivated the move by “ . . . in view of the current exceptional circumstances in financial markets, characterised by severe tensions in certain market … Continue reading
Posted in Economics, Macroeconomics, Monetary policy
Tagged Central bank independence, central banks, European Central Bank, Financial crisis, Jean Claude Trichet, Marvin Goodfriend, Quantitative easing, Securities Markets Programme, Treaty on European Union
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No Weber after Trichet: Politics 1, Treaty 0
Jean-Claude Trichet steps down as President of the European Central Bank this October. So much is certain, if things go according to the statutes of the ECB. Things do not necessarily go according to the statutes, but it seems a certain bet that Trichet will step down as planned. A question of much concern is who will succeed him? There has been much speculation that the next President would have to come from Germany. (A common conclusion derived from the hypothesis that the Germans and French battle over ECB leadership and influence, with the first President Duisenberg, a Dutch promising to step down after a half term, being a compromise … Continue reading
Posted in Economists, Monetary policy
Tagged Axel Weber, Central bank governance, Central bank independence, European Central Bank, European Union, Jean Claude Trichet, Treaty on European Union
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A Credible Anti-Inflationary Central Bank Ignores Inflation
Today, the European Central Bank decided to keep its policy rate unchanged. I am not particularly surprised. In recent empirical work, Morten Aastrup and I estimate what determines the ECB’s interest-rate changes. It turns out that inflation or expectations thereof play no role. Instead, changes in economic activity as measured by Euro-area unemployment is an important determinant. Americans who cling to the idea that good monetary policymaking is characterized by an adherence to a variant of John B. Taylor’s rule that carries his name, may find this surprising. However, consistent with modern New-Keynesian theory (cf. Michael Woodford’s Interest and Prices, Princeton University Press, 2003), a credible anti-inflationary central bank can … Continue reading
Posted in Macroeconomics, Monetary policy
Tagged Euro, European Central Bank, John B. Taylor, Michael Woodford, Taylor rule
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