Arguments for and against an Independent Central Bank
1.Introduction
The European Central Bank (ECB) is a part of the attempt at European Monetary Union (EMU) and is the single locus of the European System Central Banks (ESCB), which has been formed from the voluntary union of national central banks, and the ECB itself. The National banks, like the Bundesbank, have however not been abolished. They merely become operating arms of the ECB. The ECB assumes responsibility for EU monetary policies, but it is the Council of Ministers and the not the ECB which is empowered to conclude agreements on the exchange rate systems in relation to non-EU currencies and to change the central rates for the single currency within the system. Therefore, for the exchange rate, it rests with the Council of Ministers and not the ECB.
Through establishing the ECB, all foreign exchange controls have been removed, exchange rats are irrevocably fixed and national currencies would eventually be replaced by a single currency, as it did happen from the 1.1.2000 with the Euro.
The primary objective of the ECB is to maintain price stability, using whatever monetary policy is necessary regardless of the costs involved in unemployment. Furthermore, the ECB will support the Unions objectives with the framework of free-market principles.
These objectives are:
·The ECB is completely independent of the institution of the Union and member state governments.
·It has got political independence, in which consists of free-market notion that the main danger to financial stability is not the activities of market agents but the workings of elected governments, which makes necessary an independent check on public spending.
·The ECB is given the responsibility for avoiding the inflationary finance of governments deficits, this becoming an instrument of control on government and not an agent of economic policy.
2.Arguments for an Independent Central Bank
The argument I am considering in favour of the ECB, is the Euro, which is just the argument in favour of
The European Central Bank (ECB) is a part of the attempt at European Monetary Union (EMU) and is the single locus of the European System Central Banks (ESCB), which has been formed from the voluntary union of national central banks, and the ECB itself. The National banks, like the Bundesbank, have however not been abolished. They merely become operating arms of the ECB. The ECB assumes responsibility for EU monetary policies, but it is the Council of Ministers and the not the ECB which is empowered to conclude agreements on the exchange rate systems in relation to non-EU currencies and to change the central rates for the single currency within the system. Therefore, for the exchange rate, it rests with the Council of Ministers and not the ECB.
Through establishing the ECB, all foreign exchange controls have been removed, exchange rats are irrevocably fixed and national currencies would eventually be replaced by a single currency, as it did happen from the 1.1.2000 with the Euro.
The primary objective of the ECB is to maintain price stability, using whatever monetary policy is necessary regardless of the costs involved in unemployment. Furthermore, the ECB will support the Unions objectives with the framework of free-market principles.
These objectives are:
·The ECB is completely independent of the institution of the Union and member state governments.
·It has got political independence, in which consists of free-market notion that the main danger to financial stability is not the activities of market agents but the workings of elected governments, which makes necessary an independent check on public spending.
·The ECB is given the responsibility for avoiding the inflationary finance of governments deficits, this becoming an instrument of control on government and not an agent of economic policy.
2.Arguments for an Independent Central Bank
The argument I am considering in favour of the ECB, is the Euro, which is just the argument in favour of
Bibliography: ·Essential of Economics, by John Sloman ·Monetary Economics, by M. Lewis & P. Mizen ·International Business; Theories, Policies and Practices; by Monir Tayeb ·Economics, 3rd Edition, by M. Parkin & M. Powell and K. Matthews ·International Financial Management, 2nd Edition, by Eun & Resnick ·Various FT 's ·Notes from Lectures and Tutorials (Words 1.986)