The Bundesbank and the formation of the ECB's monetary policy strategy

Abstract

The ECB is almost a complete copy of the Bundesbank's organization, having adopted the Bundesbank's definition of price stability and its monetary targeting strategy. But rather than following simply from coercive power attached to the relative size of the German economy and EU budget contribution, the decision to emulate the German monetary policy model was the result of the persuasive power of the Bundesbank, the domestic success of the German model, and the hope held by European central bankers and many European politicians that success could be replicated on the European level. The primary interests of European central bankers were to appear competent and to maintain their independence; their search for the monetary policy ideas that provided the best chance of achieving these goals led to the German model.