The radical moves in the US have direct implications for European banks and indirect implications for European governments. This column discusses the likely channels and notes that several European banks are both too big to fail and may be too big to be saved by their national governments alone.
Daniel Gros, Stefano Micossi, 20 September 2008
Petra Geraats, Francesco Giavazzi, Charles Wyplosz, 09 September 2008
Recent data suggest that the ECB’s credibility is worryingly low on the inflation-fighting front. This column explains how improved ECB transparency and communication could help it to regain credibility with markets and investors.
Christopher Crowe, Ellen Meade, 27 July 2008
The European Central Bank is under fire from Nicholas Sarkozy. This column introduces a new set of measures of central bank independence and transparency, which shows that the ECB is markedly more transparent than the Eurozone members’ central banks were in the 1990s.
Alan Ahearne, Juan Delgado, Jakob von Weizsäcker, 27 June 2008
Housing booms associated with credit booms are particularly damaging, but the ECB’s one-size-fits-all monetary policy is useless in pricking national bubbles. Euro area governments should use national banking regulations to dampen national bubbles and countercyclical housing taxes to prick bubbles that arise.
Guido Tabellini, 23 June 2008
The ECB and the Fed are pursuing very different policies on inflation fighting and the use of monetary aggregates in guiding policy. One of Italy’s leading economists argues that either the ECB or the Fed is making a mistake.
Francesco Giavazzi, 02 June 2008
Editor's Note: Originally posted 2 June 2008. There has been a persistent spread between the rate at which banks lend each other money and government-backed securities yields in recent months. This column describes hypotheses explaining the spread – including the possibility that banks aren’t lending in order to bankrupt acquisition targets.
Helge Berger, Volker Nitsch, 30 May 2008
The European Central Bank’s Governing Council continues to expand as new economies adopt the euro. This column presents empirical evidence that the optimal central bank committee size is seven to ten members – far fewer than the 22 members the ECB will have come 2009.
Richard Baldwin, 08 May 2010
This column, first posted 17 May 2008, reviews Willem Buiter's analysis of why the ECB is so hesitant to buy debt. Central banks can go broke – and some in developing countries have done so recently. The ECB is now lending against dubious collateral. An ECB recapitalisation seems unthinkable at the moment, but that’s why it is a good time to think the unthinkable. Willem Buiter considers the question at length in CEPR Policy Insight No. 24 and argues that Eurozone fiscal authorities should, ASAP, agree on a formula for fiscal burden-sharing should an ECB recapitalisation ever be necessary.
Petra Geraats, Francesco Giavazzi, Charles Wyplosz, 07 February 2008
The latest Monitoring the European Central Bank Report argues that the ECB has a serious credibility and communication problem: the way the Governing Council makes its interest rate decisions remains clouded.
Mika Widgrén, 25 February 2008
The Fed’s policy changes seem nimble compared to the ECB’s. Here one of Europe’s leading analysts of voting mechanisms argues that the ECB’s institutional design accounts for the difference. Forthcoming ECB reforms are unlikely to alleviate the problem.
Petra Geraats, Francesco Giavazzi, Charles Wyplosz, 07 February 2008
Central Banking works by guiding the expectations of savers, investors, consumers and markets – not an easy job. This column, based on the latest report in CEPR’s series ‘Monitoring the European Central Bank’, argues that the job would be easier if the ECB published its anticipated interest rate path and voting records.
Carlo Favero, Francesco Giavazzi, 21 January 2008
The European Economic and Monetary Union (EMU) has created a new economic area, larger and closer with respect to the rest of the world. Area-specific shocks are more important than country-specific, thus it is not surprising the European Central Bank (ECB) use models to study optimal monetary policy in the Euro area assuming it works essentially as a closed economy, hit primarily by domestic shocks. The authors of CEPR DP6654 explore the variable most directly related to current and expected monetary policy, the yield on long-term government bonds, and determine whether the response of long-term rates is consistent with a closed economy.
Tommaso Monacelli, 14 December 2007
The ECB’s decision to leave interest rates unchanged lacks transparency and appears inconsistent with the specific policy framework that the ECB itself has decided to embrace. In the current period of great uncertainty, transparency would pay large dividends.
Meredith Beechey, Benjamin Johannsen, Andrew Levin, 24 October 2007
Recent history of long-run inflation expectations suggests reasonably well-anchored expectations in both regions, however no studies to date have compared the recent evolution and dispersion across forecasters' long-horizon projections in the United States to those in the EU. The authors of CEPR DP6536 use daily evidence from financial markets and surveys, which reveal a substantially greater degree of forecaster disagreement about long-run inflation outcomes in the United States than in the euro area.
Stephen Cecchetti, 15 August 2007
A revised and updated version of the 13 August column on the basic how's and why's of what the Fed has been doing to calm financial markets.
Stephen Cecchetti, 13 August 2007
Here are the basic how's and why's of what the Fed has been doing to calm financial markets.
Charles Wyplosz, 21 July 2007
The ECB’s opacity, lack of open debate and refusal to decide by voting bear at least some responsibility in the declining support for the euro. This makes the ECB an easy target for politicians looking for scapegoats. For the good of the Euro-area citizens, the ECB ought to change its ways.
Francesco Giavazzi, 19 June 2007
Sarkozy repeatedly criticised the European Central Bank during the campaign; his intuition was correct but his aim was off. By forcing the ECB to be more transparent and accountable, he would contribute to improving monetary policy in Europe.
Michael Woodford, 26 March 2007
Should money supply play a role in monetary policy-making? The author of CEPR DP6211 reviews the pros and cons and finds that there are no compelling reasons to assign a prominent role to monetary aggregates in monetary policy-making. The goals of the ECB's two-pillar strategy - which includes a role for money - are praiseworthy; the author believes that ECB justifications for looking at monetary aggregates provide little support for this approach.
Olivier Blanchard, Francesco Giavazzi, 01 December 2005
Written in December 2005: No central bank, not even the ECB can focus exclusively on inflation. Adopting policy that allows it to consider economic activity would require the ECB to articulate its rationale with great care, but its British and American counterparts show how. Credibility does not require dogmatism, but rather clarity of purpose.