Ecb Monetary Policy
Monetary Policy
The European Central Bank
Organization
European System of Central Banks
European Central Bank (ECB)
Malta Greece Spain Ireland Bulgaria Sweden Denmark
Slovenia France Slovakia Austria Latvia Poland Romania
Finland Estonia Germany
Cyprus
Netherlands Hungary Lithuania
United Kingdom Czech Republic
Eurosystem
Page 2
Belgium
Italy
Portugal
Luxembourg
Decision-Making
THE DECISION-MAKING BODIES OF THE ECB
EXECUTIVE BOARD
President Vice-President Four other members
GOVERNING COUNCIL
Executive Board Governors of the EURO area NCBs
GENERAL COUNCIL
President Vice-President Governors of the EU Member NCBs
Prepares meetings of the Governing Council Implements monetary policy Manages day-to-day business Exercises certain powers
Formulates monetary policy Adopts guidelines and makes decisions to ensure the performance of the Eurosystem ESCB Commitees
Has no responsibility for monetary policy Tasks of former EMI Reports about progress towards convergence Advises preparation for adopting Euro
Page 3
Mandate of the Eurosystem - Two-Pillar Approach
The primary objective is to maintain price stability.
Without prejudice to this objective, the Eurosystem shall support the general economic policies of the European Community.
Makes the monetary policy decisions based on an overall assessment of the risks to price stability
Governing Council
ECONOMIC ANALYSIS on the economic dynamics and shocks
cross-checking
MONETARY ANALYSIS on monetary trends
Full set of information
Page 4
Comparison: FED and the Eurosystem
Topic decision-making Eurosystem Governing Council FED FOMC
€: all NCBs are allowed to vote equally $: 5 out of 12 reserve banks are allowed to vote Executive Board has less power than the Board of Governors objectives Price stability Multiple objectives
FED is more flexible than the Eurosystem Implementation Decentralized Centralized
The European Central Bank
Organization
European System of Central Banks
European Central Bank (ECB)
Malta Greece Spain Ireland Bulgaria Sweden Denmark
Slovenia France Slovakia Austria Latvia Poland Romania
Finland Estonia Germany
Cyprus
Netherlands Hungary Lithuania
United Kingdom Czech Republic
Eurosystem
Page 2
Belgium
Italy
Portugal
Luxembourg
Decision-Making
THE DECISION-MAKING BODIES OF THE ECB
EXECUTIVE BOARD
President Vice-President Four other members
GOVERNING COUNCIL
Executive Board Governors of the EURO area NCBs
GENERAL COUNCIL
President Vice-President Governors of the EU Member NCBs
Prepares meetings of the Governing Council Implements monetary policy Manages day-to-day business Exercises certain powers
Formulates monetary policy Adopts guidelines and makes decisions to ensure the performance of the Eurosystem ESCB Commitees
Has no responsibility for monetary policy Tasks of former EMI Reports about progress towards convergence Advises preparation for adopting Euro
Page 3
Mandate of the Eurosystem - Two-Pillar Approach
The primary objective is to maintain price stability.
Without prejudice to this objective, the Eurosystem shall support the general economic policies of the European Community.
Makes the monetary policy decisions based on an overall assessment of the risks to price stability
Governing Council
ECONOMIC ANALYSIS on the economic dynamics and shocks
cross-checking
MONETARY ANALYSIS on monetary trends
Full set of information
Page 4
Comparison: FED and the Eurosystem
Topic decision-making Eurosystem Governing Council FED FOMC
€: all NCBs are allowed to vote equally $: 5 out of 12 reserve banks are allowed to vote Executive Board has less power than the Board of Governors objectives Price stability Multiple objectives
FED is more flexible than the Eurosystem Implementation Decentralized Centralized
References: Daniela Garbor; “The ECB and the Eurozone debt crisis” available at http://www.academia.edu/868218/The_ECB_and_the_European_Debt_Crisis Daniel L. Thornton; “The Federal Reserve’s Response to the Financial Crisis: What It Did and What It Should Have Done“; Working Paper 2012-050A; October 2012; available at http://research.stlouisfed.org/wp/2012/2012-050.pdf Christopher J. Neely; “The European Debt Crisis and Its Implications for the United States”; The University of Missouri–St. Louis, St. Louis, MO; September 13, 2012 Page 20