Advertisement

Reforming the European Central Bank

  • Christophe BlotEmail author
  • Paul Hubert
  • Fabien Labondance
Chapter

Abstract

Since the subprime and sovereign debt crises, the European Central Bank (ECB) has enlarged its prerogatives and objectives. The ECB has taken over the objective of financial stability, has expanded the range of its instruments, and is now in charge of the supervision of significant banks within the Banking Union. These changes took place without a treaty change. The ECB has behaved pragmatically to deal with the crisis and has adapted its operational framework to fix the many dimensions of the crisis. It thus had to take decisions which had not been envisaged during the drafting of the Treaty and whose legality was contested. Those decisions have also highlighted the pitfalls of European governance, calling for reforms. However, those reforms should not only concern fiscal and institutional issues. There is also room to improve the governance of the ECB and of monetary policy. Finally, since 1999, the euro area has grown from 11 to 19 members, which raises the question of the decision-making process. This contribution looks back at these elements of the monetary governance of the euro area and suggests ways of reform that would improve the implementation of monetary policy. We talk about expanding its mandate in terms of financial stability, the need to clarify the border between monetary policy and public finances and the reform of its decision-making process.

Keywords

Financial stability Unconventional monetary policy Governing Council Banking Union 

References

  1. Altavilla, Carlo, Domenico Giannone, and Michele Lenza. 2014. The Financial and Macroeconomic Effects of OMT Announcements. Centre for Economic Policy Research (CEPR).Google Scholar
  2. Antonin, Céline, and Vincent Touzé. 2014. Europea bancaire:l’Union fait-elle la force ? Note OFCE, No. 46.Google Scholar
  3. Balls, Ed, James Howat, and Anna Stansbury. 2016. Central Bank Independence Revisited: After the Financial Crisis, What Should a Model Central Bank Look Like. M-RCBG Associate Working Paper Series 67.Google Scholar
  4. Beau, Denis, Laurent Clerc, and Benoit Mojon. 2012. Macro-prudential Policy and the Conduct of Monetary Policy. Banque de France Working Paper, No. 390.Google Scholar
  5. Blot, Christophe, Jérôme Creel, Paul Hubert, and Fabien Labondance. 2014. Dealing with the ECB’s Triple Mandate? Revue de l’OFCE-Debates and Policies 134: 163–173.Google Scholar
  6. Blot, Christophe, Jérôme Creel, Paul Hubert, Fabien Labondance, and Saraceno Francesco. 2015. Assessing the Link Between Price and Financial Stability. Journal of Financial Stability 16: 71–88.CrossRefGoogle Scholar
  7. Borio, Claudio, and Haibin Zhu. 2012. Capital Regulation, Risk-Taking and Monetary Policy: A Missing Link in the Transmission Mechanism? Journal of Financial Stability 8 (4): 236–251.CrossRefGoogle Scholar
  8. Buiter, Willem. 2014. Central Banks: Powerful, Political and Unaccountable? Journal of the British Academy 2: 269–303.Google Scholar
  9. Creel, Jérôme, Paul Hubert, and Fabien Labondance. 2015a. Financial Stability and Economic Performance. Economic Modelling 48: 25–40.CrossRefGoogle Scholar
  10. Creel, Jérôme, Paul Hubert, and Fabien Labondance. 2015b. The Intertwining of Financialisation and Financial Instability. OFCE Working Paper, No. 14.Google Scholar
  11. Goodhart, Charles A. 2011. The Changing Role of Central Banks. Financial History Review 18 (2): 135–154.CrossRefGoogle Scholar
  12. Goodhart, Charles, and Dirk Schoenmaker. 2014. The ECB as Lender of Last Resort? VOX CEPR’s Policy Portal.Google Scholar
  13. Hayo, Bernd, and Pierre-Guillaume Méon. 2013. Behind Closed Doors: Revealing the ECB’s Decision Rule. Journal of International Money and Finance 37: 135–160.CrossRefGoogle Scholar
  14. Sah, Raaj Kumar, and Joseph E. Stiglitz. 1988. Committees, Hierarchies and Polyarchies. The Economic Journal 98 (391): 451–470.CrossRefGoogle Scholar
  15. Schwartz, Anna J. 1995. Why Financial Stability Despends on Price Stability. Economic Affairs 15 (4): 21–25.CrossRefGoogle Scholar
  16. Smets, Frank. 2014. Financial Stability and Monetary Policy: How Closely Interlinked? International Journal of Central Banking 10 (2): 263–300.Google Scholar
  17. Whelan, Karl. 2015. The ECB and Financial Assistance Programs: Has ECB Acted Beyond Its Mandate? Monetary Dialogue, October.Google Scholar

Copyright information

© The Author(s) 2018

Authors and Affiliations

  • Christophe Blot
    • 1
    • 2
    Email author
  • Paul Hubert
    • 1
  • Fabien Labondance
    • 3
  1. 1.OFCE, Sciences PoParisFrance
  2. 2.Université Paris NanterreNanterreFrance
  3. 3.CRESE Université de BesançonBesançonFrance

Personalised recommendations