Working Paper: NBER ID: w14489
Authors: Stephen G. Cecchetti; Kermit L. Schoenholtz
Abstract: In this history of the first decade of ECB policy, we also discuss key challenges for the next decade. Beyond the ECB's track record and an array of published critiques, our analysis relies on unique source material: extensive interviews with current and former ECB leaders and with other policymakers and scholars who viewed the evolution of the ECB from privileged vantage points. We share the assessment of our interviewees that the ECB has enjoyed many more successes than disappointments. These successes reflect both the ECB's design and implementation. Looking forward, we highlight the unique challenges posed by enlargement and, especially, by the euro area's complex arrangements for guarding financial stability. In the latter case, the key issues are coordination in a crisis and harmonization of procedures. As several interviewees suggested, in the absence of a new organizational structure for securing financial stability, the current one will need to function as if it were a single entity.
Keywords: ECB; monetary policy; financial stability; euro area; enlargement
JEL Codes: E42; E58
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| ECB's successful monetary policy (E52) | low and stable inflation rates (E31) |
| ECB's design and implementation (E58) | successful monetary policy (E52) |
| ECB's operational framework (E52) | price stability (E31) |
| ECB's independence from national governments (E58) | credibility (D83) |
| enlargement of the euro area (F36) | challenges in financial stability and coordination (F65) |
| existing framework (Y20) | struggles to function effectively (I12) |