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|کد مقاله||سال انتشار||مقاله انگلیسی||ترجمه فارسی||تعداد کلمات|
|24769||2002||27 صفحه PDF||سفارش دهید||10723 کلمه|
Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : European Economic Review, Volume 46, Issue 3, March 2002, Pages 443–469
In this paper we analyze the impact of economic and institutional (ECB decision rules) asymmetries on the effectiveness of monetary policy in Euroland. We consider a model where asymmetric shocks and divergent propagation of shocks in output and inflation are potential causes of tensions within the ECB concerning the conduct of common monetary (interest rate) policy. Welfare implications of the alternative decision procedures are discussed.
The European Central Bank (ECB) has the sole responsibility for the conduct of monetary policies in Euroland. The Maastricht Treaty provides some general principles about the objectives to be pursued by the ECB and has set the institutional framework within which the ECB will take its decisions. More precisely, the statutes of the ECB were enshrined in the Maastricht Treaty. The principles underlying these statutes are, first, that the primary objective of the ECB is the maintenance of price stability (art. 105), and, second, that in order to achieve this objective, the ECB should be politically independent (art. 107). The Treaty also formulates other objectives to be pursued by the ECB (e.g. high employment) but always adds the proviso that this should not interfere with the primary objective which is price stability. The decision making body is the Governing Council (GC), which consists of the Governors (Presidents) of the National Banks of the Euro-countries, and of the President, the Vice-President and the four Directors of the ECB. Each of the members have one vote. Although the statutes of the ECB mandate the members of the ECB-Council to represent the interests of Euroland as a whole, it is quite likely that there will be occasions when the national representatives will pursue national interests.1 One major question that arises in this context is the following. Will the national representatives in the ECB-Council take a union-wide perspective when deciding about monetary policies, or will they give a high weight to national economic conditions when taking these decisions? The question is important. For, if asymmetric shocks and/or adjustment speeds occur frequently in the future EMU, a nationalistic attitude of the ECB Council members, triggered by divergent economic conditions, may lead to frequent conflicts about the appropriate policies to be pursued. One can expect that, although each of the Governors will share similar preferences about inflation and output stabilization, these divergent economic conditions may lead them to take different positions on the desirable stance of monetary policies. When that happens, national viewpoints will loom large in the decision making process. As a result, the decision making process within the ECB will be made difficult. At the end of the day, however, a common monetary policy must be implemented. The issue of divergent optimal (national) monetary policies thus leads to a need for decision procedures. These procedures will determine the way country-specific desires about monetary policies are aggregated into one common monetary policy. Obviously, the modalities of the decision procedure will matter in this aggregation problem and will also affect macro-economic performance and welfare of the individual countries. This paper provides a first step in analyzing the effects of decision procedures in the GC on effectiveness of monetary policy and macro-economic stabilization.2 The paper proceeds in two steps. First, in Section 2 we assess empirically the magnitude of the divergence in ‘national interests’ that may arise and their effects on the desired monetary policy reactions. This we achieve by using the benchmark Rudebusch and Svensson (1999) model for optimal monetary policy in an intertemporal setting. Second, having established the asymmetries in desired optimal monetary policy reactions, we formulate some rules for the decision process within the GC (Section 3). Four types of decision procedures will be analyzed: a consensus model, a purely nationalistic rule where all representatives only take into account their national interests, an intermediate case where the national representatives take a nationalistic perspective and the EMU-wide perspective prevails for the ECB representatives and an EMS-rule where German monetary preferences are applied. Effects of the decision procedures on macro-economic stabilization will be discussed in Section 4. Finally, Section 5 contains a summary of the main findings of the paper.
نتیجه گیری انگلیسی
In this paper we analyzed how different decision procedures in the Governing Council of the ECB affect economic conditions and welfare in the different member states, when shocks and transmission processes are asymmetric. In order to do so, we derived the optimal interest rates for each member state based on the optimal linear feedback rules as proposed by Rudebusch and Svensson (1999). We then applied majority rule assuming different procedures about the way the members of the Council use national versus euro-wide aggregates. Our results can be summarized as follows. First, when majority voting is used, the ECB can effectively control the GC and thus the monetary policy in EMU. That is, when all the ECB-board members take the same position on the desired interest rate based on a euro-wide perspective, then the ECB-board's desires almost always prevail. The national governors then have a very small influence on the outcome when they take a nationalistic perspective, i.e. when their desired interest rate depends only on national economic conditions. This result has to do with the fact that the desires of the national governors tend to offset each other when asymmetries in the shocks or in the transmission process are high. This may lead to some frustration (measured by the difference between nationally desired interest rates and the decided interest rate) among these national central bankers. We also find that this frustration is typically larger for small countries. Second, we find that when countries increase their desire to stabilize output they are increasingly frustrated about the decisions taken in Frankfurt. This result can be given the following interpretation. When national authorities increase their ambition to stabilize output, their desired interest rate will react more to asymmetric shocks. There will, therefore, be a greater spread in the nationally desired interest rates, so that these will correlate less well with the one decided in Frankfurt (the median voter's desired interest rate). Third, welfare is in general improved by having an ECB-board take a euro-wide perspective (the ‘ECB-rule’) compared with a regime in which all members of the Governing Council take a nationalistic view (the ‘nationalistic rule’) or an EMS regime where Germany sets monetary policy. In general, we find that the ECB-rule leads to lower losses, i.e. is a better rule to minimize the variability of output, inflation and the interest rate, than the nationalistic rule and than the EMS-rule. The superiority of the ECB-rule is most pronounced with respect to the EMS-rule. This is not surprising. In the EMS-rule only information about German economic conditions is used to set the optimal interest rate of all the member states. This is generally a less efficient rule than a policy rule that uses information of all the countries in the system. This paper has many limitations which invite further research. For instance, in the estimation of inflation and output equations we neglected the real exchange rate as a possible cause of output and inflation movements. Obviously this external source of economic fluctuations may be of considerable importance for small open economies. Incorporating the real exchange rate along the lines of Peersman and Smets (1999) seems an interesting way to account for these external forces. However, it would also increase the dimension of the state space considerably, which is large already in the current setting. We plan to pursue this route of research in the near future. Second, the optimal desired interest rate for Euroland as a whole has not been derived explicitly. Instead we assumed that a proxy for this variable was given by the weighted average of the desired interest rates of the member states. The optimal desired interest rate could theoretically be obtained in much the same way as the national desired interest rates. Here the curse of dimensionality strikes again. At the end of the day, however, we would like to argue that the approach we took is a reasonable approximation for the ECB optimal linear feedback rule. Finally, we have only considered majority voting. Our results indicate that the use of majority voting can create significant conflicts between member states in an environment characterized by asymmetric shocks. Therefore, the ECB may want to use other decision rules in which consensus plays a greater role. We hope to pursue this line of research in the future.