Why Price Stability?

Abstract

The European System of Central Banks (ESCB) is contractually obliged to ensure price stability. That is a vital prerequisite for the applicability of the nominalistic principle in a monetary economy according to which money debt consists merely of a certain quantity of accounting units like a number of dollars or euros. The conceptual pair of the nominalistic principle and price stability is seen as plausible focal principle (Schelling) of transaction cost minimizing actors of a paper money economy. On the other hand, an inflationary target of x% as suggested by Bernanke et al. contradicts not only the nominalistic principle that actually underlies the German legal system but, on its own, is also implausible as focal principle.