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Plan of the talk
• Organization of the ECB • The decision making mechanism • Monetary Policy in the Eurozone • Changes in monetary policy making during
the Great Recession • Some considerations on the current
monetary environment
Decision-making bodies of the ECB • Governing Council:
– ECB President or Vice-President – Four other members of the Executive Board – Governors of the euro area NCBs
• Executive Board: – ECB President or Vice-President – Four other members of the Executive Board
• General Council: – ECB President or Vice-President – Governors of all EU-members’ NCBs
Summarizing: Independence and Accountablity
• Independence: – from any political influence
• Accountability: – To the citizens of the EU, formally to the
European Parliament – Includes transparency in all ECB actions – Includes effective communication – Both transparency and timely communication
make monetary policy more effective
Some considerations • The problem is the fragmentation of the
national money mkts: is this the right monetary policy?
• From competitive devaluations to competitive relaxed monetary policies?
• We are living in a world of low interest rates: what consequences?
• PS: The revenge of the Mundell-Fleming model and the Poole model
This is great! • Mortgages more affordable to more people à more «liquid» housing mkt à more people mobility
• Easier consumption credit, however positive signs only from the US (automobile mkt)
• Big bonanza for all debtors – including (some) sovereign debtors «instead of offering risk-free return they offer return-free risk» (Jim Grant)
Are we sure? • Cheap credit has consequences also on
other financial mkts • Savers dislike low rates of return (hate
negative real RoR) and new derivatives are (re)created and moving to more riskier investment
• Companies may engage in more riskier project and banks may be willing to lend
• Bubbles again