European Central Bankers Research Articles

“Decoding” Policy Perspectives: Structural Topic Modeling of European Central Bankers’ Speeches

This research analyzes the speeches and interviews of high-level European Central Bank decision makers from 1997 to 2021 to identify clusters of prominent topics. Transparency is a crucial aspect of modern monetary policy, and public speeches and interviews by central bankers play a vital role in achieving it. Our study employs structural topic modeling to compare the prevalence of topics during the Global Financial Crisis, pandemic crisis, and periods of heightened inflation. Additionally, we explore the impact of central bank independence on official rhetoric.

Solidifying Consensus. An Inquiry into the Expertise of European Monetary Policy Makers

Abstract Economic experts are increasingly involved in European macroeconomic policymaking and their expertise in turn matters for economic outcomes. This fact is of particular significance with regard to the case of independent European central bankers, for monetary policy and beyond. This article presents new empirical data on who European central bankers are, and what kind of expertise they hold. It identifies patterns of expertise composition in the European Economic and Monetary Union (EMU) in longitudinal and cross-country comparison, thereby reflecting the ideational macroeconomic policy consensus of the EMU and its on first sight paradoxical – because of contradictory directions of fiscal and monetary policy – macroeconomic policy mix. The article infers two complementary logics – one of intergovernmental negotiations and another of imposed consolidation demands – by using a mixed-methods approach. It proposes these logics to leverage explanations for the resilience of EMU’s paradoxical macroecono...

National culture trumps EU socialization: the European central bankers’ views of the euro crisis

ABSTRACTThe European Union (EU) response to the euro crisis brought new relevance to the debate on socialization through European institutions. While previous studies differ in their support for EU socialization, many have argued that the euro crisis revealed a far-reaching convergence of views among Europe's leaders. Theoretically, the European Central Bank (ECB) in particular is expected to have the power to socialize its governors into a common worldview. The present article questions this proposition. Using the technique of cognitive mapping to provide an in-depth analysis of the views of five members of the ECB Governing Board, we find that even for ECB governors national culture generally trumps EU socialization. Only for ECB President Trichet significant evidence of EU socialization is found. The study also points to some new scope-conditions for socialization that may further our understanding of how European institutions may foster the sustainable socialization of views.

The (home) bias of European central bankers: new evidence based on speeches

ABSTRACTSpeeches are an important vehicle for central bankers to convey individual views on the preferred policy stance. In this article, we employ an automated text linguistic approach to create an indicator that measures the tone of the 1,618 speeches delivered by members of the Governing Council (GC) during the period 1999M1–2014M4. We then relate this variable to euro area and national macroeconomic forecasts. Our key findings are as follows. First, inflation and growth expectations have a positive and significant impact on the hawkishness of a speech. Second, different growth expectations across the euro area and different preferences significantly explain discrepancies across speakers. Third, the voiced preferences of presidents of the national central banks (NCBs) largely coincide with the level of independence their central banks had at the time of the Maastricht Treaty. However, in general, there are not much differences between members of the Executive Board and the NCB presidents. Fourth, we find some evidence that central bankers adjust the gist of their speeches depending on whether they talk at home or abroad and before or after a GC meeting. Finally, differences in central banker preferences are the key source of variation in their speeches before the financial crisis.

The (Home) Bias of European Central Bankers: New Evidence Based on Speeches

ABSTRACTSpeeches are an important vehicle for central bankers to convey individual views on the preferred policy stance. In this article, we employ an automated text linguistic approach to create an indicator that measures the tone of the 1,618 speeches delivered by members of the Governing Council (GC) during the period 1999M1–2014M4. We then relate this variable to euro area and national macroeconomic forecasts. Our key findings are as follows. First, inflation and growth expectations have a positive and significant impact on the hawkishness of a speech. Second, different growth expectations across the euro area and different preferences significantly explain discrepancies across speakers. Third, the voiced preferences of presidents of the national central banks (NCBs) largely coincide with the level of independence their central banks had at the time of the Maastricht Treaty. However, in general, there are not much differences between members of the Executive Board and the NCB presidents. Fourth, we fi...

The Euro Area, a Stressful Monetary Union? Learning from Newspapers’ Monetary Policy Coverage

Through a textual analysis of national newspaper articles covering European central bankers’ statements and policy decisions from 1999 to 2011, I derive the concerns expressed by national media in the Economic and Monetary Union (EMU). I consider these concerns as a benchmark for national preferences, and thus for the preferences of national central bankers in the EMU. I also test the existence of groups of national media (i.e., national publics) according to their shared expressed concerns. The results show that in the euro zone, similar concerns are shared by different country groups, corresponding to a group of countries from Northern Europe (Belgium, Finland, and the Netherlands), Southern Europe (Spain and Portugal), and the Periphery (Italy, Greece, and Ireland), but that there are two isolated countries (France and Germany), whose newspapers do not share the issues raised by the rest of the European newspapers. This approach provides further insights into the potential heterogeneity of the European central bankers inside the Governing Council of the ECB in terms of policy preferences.

Dissecting the brains of central bankers: The case of the ECB’s Governing Council members on reforms

Since 2009, European central bankers have supported some reforms, in order to draw roadmaps to get out of the euro debt crisis. This paper tests whether the educational and professional background of European central bankers matter for the type of reforms each of them advocated. Through a textual analysis of public speeches delivered by the European central bankers, we draw a cognitive map for each of them and, thus, of the reforms they propose as ways out of the euro debt crisis. Our results show that their occupational background is an important determinant of their respective economic reform proposals.

Dissecting the Brains of Central Bankers: The Case of the ECB's Governing Council Members on Reforms

Since 2009, European central bankers have supported some reforms, in order to draw roadmaps to get out of the euro debt crisis. This paper tests whether the educational and professional background of European central bankers matter for the type of reforms each of them advocated. Through a textual analysis of public speeches delivered by the European central bankers, we draw a cognitive map for each of them and, thus, of the reforms they propose as ways out of the euro debt crisis. Our results show that their occupational background is an important determinant of their respective economic reform proposals.

Communication, Credibility, and Price Stability: Lessons Learned from Japan

Over the past couple of decades, central banks have been taking steps to increase the transparency of their monetary policies through clearer communications with the public. While there are many differences between the economic challenges Japan has been struggling with in the past decade and those facing U.S. and European central bankers now, we can learn a great deal about combating deflation from Japan’s experiences.

L’évolution de la pensée d’Alexandre Lamfalussy sur l’intégration monétaire européenne, 1961-1993

The establishment of the European Monetary Institute (EMI), the predecessor of the European Central Bank, on 1 January 1994, was a milestone in the process of European monetary integration. In this paper, we look at the work on European monetary integration of Alexandre Lamfalussy, its first president. Lamfalussy pursued a threefold career: as a private banker, a central banker and an academic. Partly under the influence of Robert Triffin, Lamfalussy soon became interested in European monetary issues. This paper analyses his views on the international monetary system and on European monetary integration, including his contributions to the Delors Report, which provided the framework for European Monetary Union. The paper draws extensively on archival research in the Lamfalussy papers at the Bank for International Settlements and the minutes of the EEC Committee of Governors’ meetings. The paper provides not only an analysis of Lamfalussy’s thought on European monetary integration, but also offers crucial insight into the Weltanschauung and way of thinking of European central bankers in this period.

Central Bankers in the Contemporary Global Field of Power: A ‘Social Space’ Approach

In the context of the financialization of the global economy, and the importance of financial elites (see Savage and Williams in this volume) the role of central banks has become particularly important. The financial crisis of August– September 2007, (the ‘sub-prime mortgage crisis’) has given a new illustration of the growing functional importance of these central banks, which are in charge of monetary and financial stability through their particular daily interventions on the markets. As ‘lenders of last resort’ in case of declining confidence between banks or financial actors and, more generally, ‘custodians of monetary stability’ as they are often described, central bankers determine the general level of confidence in the set of monetary and financial instruments which have developed in recent years, and contribute highly to the production of macroeconomic decisions, and financial dynamics. Behind the opaque walls of central banks, well known to be very secretive institutions, particular social agents appear to be a new economic and political elite. Their role, action and beliefs have become determinant for the reproduction of the economic and social order as a whole. This specific ‘financial’ elite is related to the state bureaucracy (from which it frequently emanates), to the political field and to the dominant actors of the financial markets. In Europe, the creation of the European Central Bank (ECB) has objectified this process by putting the so-called ‘independent’ governing council of the ECB at the centre of monetary policy but also of macroeconomic policy in general. In the very recent period, European central bankers have been put under political pressure by French politicians, condemning the high level of interest rates and above all the over-evaluation of the Euro, resulting from the specific actions of the ECB. In this situation, knowledge of the social trajectories which lead to the position of central banker in different parts of the world is a first step to understanding the social reality behind the emergence of these new global elites. It will help for example to determine the degree of homogeneity of this group and its internal structures; this knowledge will also give an understanding of the social ‘embeddedness’ of monetary and macroeconomic decisions, otherwise seen as structural macro-conditions without any social content. In this sense, the sociology of central bankers is a specific contribution to economic sociol-

Were Verbal Efforts to Support the Euro Effective? A High-frequency Analysis of ECB Statements

This paper studies the effects of verbal interventions by European central bankers on high-frequency euro-dollar exchange rates. We find that ECB verbal interventions have had only small and short-lived effects. Verbal interventions which are reported in news report headlines are more likely to be successful, whereas verbal interventions on days with releases of macroeconomic data are less successful. There is no difference in the effects of comments by members of the ECB Executive Board and presidents of national central banks.

The Group of Seven

It is entirely appropriate to question whether the Group of Seven (G7) should even feature in this Global Monitor series. The series has provided updates, commentary and analysis of institutions in...

Look who's talking: ECB communication during the first years of EMU

This paper studies communication by European central bankers during the first years of the European Economic and Monetary Union. We find that comments by central bankers on interest rates, inflation and economic growth in the Eurozone have often been contradictory. However, over the years, interest rate statements have become more in line with each other. National central banks continue to dominate communication on monetary policy. The ECB Executive Board is the only group of central bankers to observe radio silence before ECB Governing Council meetings. Copyright © 2006 John Wiley & Sons, Ltd.

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

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.

Voting Transparency in a Monetary Union

We examine whether the central bank council of a monetary union should publish its voting records when members are appointed by national politicians. We show that the publication of voting records lowers overall welfare if the private benefits of holding office are sufficiently low. High private benefits of central bankers lower overall welfare under opacity, as they induce European central bankers to care more about being re-appointed than about beneficial policy outcomes. We show that opacity and low private benefits jointly guarantee the optimal welfare level. Moreover, we suggest that non-renewable terms for national central bankers and delegating the appointment of all council members to a European agency would be desirable.

Towards a New National Policy?

The Watkins Report1 is, or so one may hope, the final contribution of the Honourable Walter L. Gordon to the propagation of his well-known views on the dangers to Canada of foreign, specifically American, direct investment in this country. Those views were originally a fairly obvious projection of the private interests of a Toronto accountant, management consultant, and genteel man of property in the old-fashioned sense, and as such readily vulnerable to criticism on economic and political grounds, though they nevertheless succeeded in capturing the cachet of genuine radicalism among the semi-literate fringe of Canadian public opinion (fringe is too diminutive a concept however to be fully descriptive). Fortunately for Mr. Gordon, and unfortunately for Canada, economic and political developments in the world position of the United States since the Report of the Royal Commission on Canada's Economic Prospects of 1957 was published have done much to create a fire to provide the smoke which the Gordon Commission sniffed in the air with great alarm but was unable to track down to a credibly identifiable source in the behaviour of United States enterprises in Canada. On the one hand the rapidly mounting unpopularity of United States military policy in assumed defence of the free world against communism, epitomized in the war in Vietnam, and on the other hand the United States balance-ofpayments policy of attempting to maintain an overvalued currency by irritating and quite futile controls over United States private foreign investment, adopted largely to placate the European central bankers, have made extraterritoriality a major issue and provided the Gordonites with a legitimate (though very complex) political issue to replace the largely non-existent economic one with which their concern about American direct investment in Canada started. Add to this altered environment of experience, and even more of attitude, the natural propensity of any group of responsible academics assigned to the investigation of an alleged problem to report solemnly that a problem does indeed exist, though its nature may be different and more complex than originally thought, together with the temptation for a predominantly young group especially when working in a heady centennial year to think in apocalyptic terms, and it is not surprising to find that the Task Force has apotheosized a mutated Gordonism into a new national policy. This is not to say that the Gordon viewpoint has won a strong endorsement in detail from the Task Force, and still less to deny that the Report is a useful, sensible, and important document on the whole. Most noticeably, the Report is extremely sceptical of any suggestion of the desirability of buying Canada back or of restricting foreign invest-

Monetary Policy and the Balance of Payments

A NYONE WHO DISCUSSES the U. S. balance of payments problem nowadays, and what should be done about it, invariably will mention monetary policy. He not only will mention monetary policy; he will pass judgment on it. If the speaker is an American or European banker, he is likely to say what we need is less monetary ease. The President's balance-ofpayments program, outlined in his message to Congress on February 10, has been widely criticized in the financial community here and abroad for not recognizing the need for a tighter monetary policy and higher interest rates. If the speaker is a university professor of economics, it is hard to predict what he will say, except that it will be critical. One group of professors will say that what we need is a floating exchange rate; then our monetary policy could be more expansionary. This, in turn, would help reduce our rate of unemployment; it would enable our economy to grow faster, and it also would enable us to stop being a pincushion for General DeGaulle. On the other hand, anyone who discusses U. S. monetary policy nowadays will almost certainly mention the balance of payments situation. If he is predisposed toward tighter money, he will use the balance of payments situation as a battering ram to smash any suggestion that monetary policy should be made somewhat easier. Besides, he will assert, the unemployment problem is structural, so an easier monetary policy wouldn't reduce it. However, if the speaker is predisposed toward easier money, he may pooh-pooh the sensitivity of international capital flows to differences between U. S. and foreign interest rates. Even more probably, he may say that we cannot let European central bankers and ex-generals determine our monetary policy. The exponents of this point of view would have monetary policy be guided only by considerations of domestic full employment. According to them, the high unemployment rate is caused by inadequate aggregate demand, rather than by structural defects. As to the resulting reaction of foreigners, the advocates of fullsteam-ahead would insist that the foreigners really can't afford to do anything more than scream and to take probing actions to test our nerves. To do more than that would wreck the entire international financial mechanism, thereby precipitating a worldwide crisis from which they would suffer as much as we would; hence they would not dare to do more than protest. The advocates of this latter position, by and large, are academicians who have never met a European central banker. U. S. Government officials and commercial bankers who have done so are much more cautious. They have seen the reds of their counterparts' eyes, and are not at all sure that they are bluffing. Besides, even bluffing can precipitate crises unintended and undesired by all concerned. It is a mark of maturity and responsibility to avoid goading an opponent to a point where he may feel impelled to pull a bluff that might possibly slip out of his control. In international monetary affairs, as in international diplomacy, brinkmanship can be a deadly game.