European System Of Central Banks Research Articles

A Study on Central Banks and Social Responsibility: the Case of the ESCB

ABSTRACT Can and should central banks have a social responsibility (‘central banks’ social responsibility’—CBSR) to play a role in social issues, such as economic inequality? This article provides a conceptual account and analysis of the benefits and challenges associated with CBSR. After showing that CBSR is gaining momentum through the pull of influential actors including central banks themselves, policy-makers, and public opinion, I discuss two types of CBSR the European Central Bank (ECB) could engage in. The moderate approach involves action based on the primary mandate, whereas use of the secondary mandate would present an enlarged version of CBSR. While action based on the primary mandate is both legally possible and desirable, the ‘powered’ version of CBSR comes with significant legal hurdles. Absent clear prioritization by the Union’s political institutions of certain economic policies and objectives, selection and prioritization by the ECB of one or more policies would risk opening the floodgates to policy-making. The enlarged version of CBSR is also undesirable, as it would make the scrutiny of the ECB’s activity more challenging for the European Parliament, negatively alter the public trust the ECB enjoys, and heighten the risk of friction within the European System of Central Banks.

The effectiveness of the european central bank in pursuing its prime mandate

<p class="MsoNormal" style="margin-top: 12pt; text-align: justify;"><span lang="EN-US" style="font-family: arial, helvetica, sans-serif;">The objectives and tasks of the European Central Bank (ECB) are defined in Articles 2 and 3 of Protocol (No 4) on the Statute of the European System of Central Banks (ESCB) and of the European Central Bank (ECB). While in Article 3,1° of this Protocol other tasks are mentioned, the prime objective of the ESCB and therefore of the ECB, is price stability. This concept was originally specified by the Executive Board of the ECB as an annual increase of less than 2% in the inflation rate over the medium term, measured by the Harmonized Index of Consumer Prices (HICP) for the euro area. This paper examines to what extent the ECB has been effective in realizing price stability over the period from January 1, 2000 to December 31, 2022. Price stability is important for economic agents. It allows them to plan their savings, spending and investment eventually resulting in sustained economic growth.<span style="mso-spacerun: yes;">   </span>Notwithstanding the commitment of large human and other resources and the use of unconventional monetary policies, the ECB did not realize its prime objective during a large part of this period. We conclude that putting too much confidence in DSGE-modeling as one of the methodologies to determine monetary policy, may have played an important role in the ECB not achieving its main statutory objective.</span></p>

The European Central Bank, national central banks, and the unity of the international representation of the European System of Central Banks

Although centred on the European Central Bank, the international representation of the European System of Central Banks also relies on the national central banks. This article analyses the requirement of unity of the international representation of the ESCB, assesses the current means through which it is implemented, and identifies areas of possible improvement in the coordination of the respective international activities of the European Central Bank and of national central banks. The article argues that the principle of sincere cooperation can play a significant role, both within and beyond Article 6 of the ESCB/ECB Statute. Although the existing soft-law arrangements within the ESCB are more effective than for the EMU in general, improvements are possible regarding the conclusion and implementation of international cooperation agreements. Stronger synergies with the activities of national central banks would also help the emergence of a more proactive and influential international cooperation strategy. European System of Central Banks, Eurosystem, national central banks, international representation

The aggregate effects of government income transfers shocks: EU evidence

This paper estimates the aggregate effects of government income transfers shocks for a sample of EU countries. I construct a new measure of transfers shocks based on a dataset by public finance experts of the European System of Central Banks (ESCB). The identification strategy consists of a narrative analysis of policy actions in old age pensions reported in the ESCB dataset. I find that increases in old age pensions have a positive impact on aggregate expenditure components and employment consistent with a multiplier effect between 0 and 1.

Public debt and money for a political ecology in the European Union

The pandemic crisis has displayed the lack of precautionary measures and health infrastructure in most advanced countries, not forgetting how little help has been granted to poor countries. In the face of a worldwide ecological crisis, there has been no global cooperation. In addition, in 2020, catastrophic events due to climate change have accelerated. Public finances have been called upon to support the economy and to engineer a much hoped-for short-term recovery on the one hand, and to put financial systems in order to deal with climate change in the coming crucial decade on the other.Our work tries to address this dual challenge. First, it handles the crucial problem of debt sustainability in a theoretical framework that emphasizes the discounted ratio of future primary balances rather than the level of debt. Simulations of the theoretical model used are provided for the four largest countries of the euro zone to show the conditions in which public debt could be sustainable during the crisis and the subsequent recovery.Moving to the longer-term challenge of handling climate change, societies must confront the irruption of climate-related risks that are plagued with radical uncertainty. To deal with this new financial landscape, the institutional structure of finance must be reformed. Furthermore, macroeconomic disequilibria are no longer symmetrical. The threat of a deflationary depression is far higher than inflationary risks. Consequently, central banks need to integrate macro-prudential and monetary policies and to collaborate with fiscal policy. The financial regulatory authorities are developing precautionary macroeconomic scenarios to induce private agents to report the ecological costs of their economic activity and then to reduce those costs under their monitoring.Strategic planning is indispensable for the financing of long-term infrastructure investments that receive insufficient finance from the markets. Three categories of actors stand out for the long-term restructuring of Europe’s financial systems: first, the public development banks networked under a reformed EIB; second, responsible long-term financial investors, who understand that economic damage from climate change negatively influences their long-run financial returns; and third, the European system of central banks that can account for the differentiated impact of climate change within the euro zone.

A digital euro for everyone: Can the European System of Central Banks introduce general purpose CBDC as part of its economic mandate?

A digital euro for everyone: Can the European System of Central Banks introduce general purpose CBDC as part of its economic mandate?

Stärkung der finanziellen Souveränität Europas mit Hilfe der Kapitalmarktunion

‘Competitiveness is crucial to make the European Union more attractive,’ wrote European Commission (EC) President Jean-Claude Juncker in his guidelines when he announced the ‘Capital Markets Union Action Plan’ in 2015. Over the past six years, we have seen good progress: Most of the announced legislative proposals have been agreed upon, while nonlegislative measures have been finalized in total. Companies, both small- and mediumsized enterprises, should be able to obtain funding all over the European Union (EU). The market players need efficient, Europe-wide reliable framework conditions. The Capital Markets Union (CMU) aims to create added value for the people of Europe, regardless of where they live or work. As for their savings and investments, households should have more choice, be well-informed, and enjoy adequate protection. The European System of Central Banks significantly supports these efforts, as this also reduces the risk of the monetary union drifting apart. The greater integration of capital market activities underpins the transmission of the single monetary policy. The fulfillment of the European Central Bank’s (ECB) mandate to maintain price stability is simplified. Developed and integrated capital markets in the euro area strengthen the euro’s international role. At the presentation of the new CMU action plan ‘A Capital Markets Union for People and Business’ in September 2020, EC President Ursula von der Leyen encouraged the EU to further improve its financial system. One of the three main objectives (along with green finance and crossborder capital flows) is to shape the regulatory framework so that investors, savers, and households can save and invest safely throughout the EU. In implementing the CMU project, some measures may take longer to achieve tangible benefits. The road still brings some challenges, such as corporate insolvency regimes and the formation of a common capital-market supervisory authority at the EU level. Successful implementation would obtain more cross-border investment and financing with lower administrative burdens and financing costs.

Debt Relief as a Last Resort for the Lender of Last Resort?

The coronavirus crisis has led to a sharp increase in the debt-to-GDP ratios of the euro area member states. Without external support, access to the capital market could be seriously threatened in the medium term for Italy, but also for other member states. While the Pandemic Emergency Purchase Programme, which is designed as a monetary policy instrument, is regarded by some as a violation of the prohibition of monetary financing, the Next Generation EU recovery fund is likely to direct the fundamental structures of the European Union towards a fiscal union with considerable redistribution elements. This article analyses an alternative strategy, namely debt relief by the European System of Central Banks through an EU debt agency. Such a scheme would be possible without amending the EU treaties and would avoid negative equity at the central banks. The question is under what circumstances would this approach be suitable and proportionate?

Key Factors Behind Productivity Trends in EU Countries

The aim of this report is to foster a better understanding of past trends in, and drivers of, productivity growth in the countries of the European Union (EU) and of the interplay between productivity and monetary policy. To this end, a group of experts from 15 national central banks and the European Central Bank (ECB) joined forces and pooled data and expertise for more than 18 months to produce the report. Group members drew on the extensive research already conducted on productivity growth, including within the European System of Central Banks and in the context of the review of the ECB’s monetary policy strategy, and worked together to conduct new analyses.After recalling the key facts and figures, the report looks into the predominant drivers of productivity growth in firms, with a focus on technology as a key determinant of aggregate productivity dynamics. It then discusses the main factors behind resource reallocation both across incumbent firms and as a result of the entry and exit of firms. Although productivity is a real-economy phenomenon and its evolution predominantly hinges on the structural features of the economy and national policies, the report also raises the question of the extent to which, and under what circumstances, monetary policy may affect productivity. In addition, it places productivity in a broader perspective by taking into account other important structural trends that are expected to have an impact on productivity in the medium-to-long run, such as globalisation, population ageing, climate change and digitalisation. Finally, the report considers the possible impacts of the coronavirus (COVID-19) pandemic on productivity in EU countries. ...

Ein Schuldenerlass als Ende mit Schrecken?

Abstract The rising debt-to-GDP ratios of the eurozone member states result not least from the coronavirus crisis. Without external support, especially with regard to Italy, but also for other Mediterranean states, access to the capital market could be seriously threatened in the medium run. The recovery fund ‘Next Generation EU’ likely directs the fundamental structures of the European Union (EU) towards a fiscal union with considerable transfer elements, while the Pandemic Emergency Purchase Programme (PEPP), which is declared as a monetary policy instrument, is even discussed as a violation of the prohibition of monetary financing. As an alternative, this contribution analyses a debt relief by the European System of Central Banks (ESCB), implemented via an EU debt agency. This construction would avoid a negative equity position of the central banks and also enable a legal integration into the EU system. The question remains: What would be the consequences of such a non-recurring step?

The German Federal Constitutional Court’s Exercise of Ultra Vires Review and the Possibility to Open an Infringement Action for the Commission

Abstract The paper examines the possible opening of an infringement procedure against Germany as a result of the breaches that emerge from the declaration by the German Constitutional Court that the Court of Justice has acted ultra vires in the Weiss judgment (C-493/17). The proportionality assessment of the Public Sector Purchase Programme (PSPP) of the European Central Bank (ECB), carried by the Court of Justice, is contested by the domestic court. We recall that the Commission enjoys great discretion regarding the launch of an infringement action based upon Article 258 of the TFEU and may be reluctant to use its powers, considering the special position of the constitutional courts in the context of Article 267 TFEU as well as the present situation of emergency following the pandemic. Yet, the possibility to start an infringement procedure for breaches of Treaty obligations resulting from an incorrect interpretation of domestic courts was admitted in case C-129/00 Commission v. Italy and applied in two subsequent cases (C-154/08 Commission v. Spain and C-416/17 Commission v. France). As a result of the ruling of May 5, 2020, the Court of Justice may find that Germany failed to fulfil obligations stemming from Article 267 TFEU and the related case-law, Article 19 TEU, as well as Article 5(2) TEU. Other breaches concern the independence of the ECB and of the Bundesbank (being it a Member of the European System of Central Banks (ESCB) and of the Eurosystem) as defined in Articles 130, 282(3) TFEU and Article 7 of the Protocol (No. 4) on the Statute of the ESCB and of the ECB. We argue in favour of the violation of all these provisions read in conjunction with the duty of loyal cooperation, laid down in Article 4(3) TEU. Yet, we conclude that it is uncertain whether the Commission will open (or continue) an infringement procedure against Germany since the Bundesbank may act to satisfy the requests of the German Constitutional Court in relation to the proportionality of the PSPP. It is to be hoped that the German State organs will make sure that the PSPP may be continued, thus ensuring the functioning of the Eurozone, despite the attack of the BVerfG to the EU Judicature and to Weiss ruling in particular.

THE ECB AND € E‐BANKNOTES – Could the ECB Issue an Electronic Equivalent of Paper-Based Euro Banknotes? Under Which Conditions Might Such ʹelectronic Banknotesʹ Have Legal Tender Status? Study Prepared Under the 2020 ECB Legal Research Programme 2020 (Topic 2)

This research paper examines whether the European Central Bank (ECB) is entitled de lege lata to issue an electronic equivalent of paper‐based euro banknotes (e‐banknotes) and, if so, under what conditions such e‐banknotes might have legal tender status. To this end, Part 2 sets the stage by discussing the reasons that might motivate or even compel the ECB to issue an e-banknote and by analyzing whether an e‐banknote is a banknote by reference to general principles of law and financial practices. Part 3 examines which monetary policy objectives and tasks could be better fulfilled if an e‐euro were issued or, conversely, whether non‐issuance could in the future impair the fulfillment of the ECB’s mandate. Subsequently, Part 4 analyses the constitutional framework that empowers the ECB, within certain clear limits, to pursue the objectives set. This includes particularly the interpretation of the term ‘banknotes’ in Article 128 TFEU as well as the content and scope of selected basic tasks set out in Article 127 TFEU and mirrored in the Statute of the European System of Central Banks (ESCB) and of the ECB. The results are then weighed against the potential interests of third parties that could be affected by an e‐euro. Part 5 proceeds by discussing the design features that a functional equivalent of a paper banknote can and must exhibit in order to meet the previously defined objectives and constitutional limits. Part 6 explores the issue of architecture, i.e. the possible models of issuance. Part 7 concludes.

Central bank statistics as part of official statistics: The case of the European System of Central Banks (ESCB)

Central bank statistics as part of official statistics: The case of the European System of Central Banks (ESCB)

The Global Dimensions of Macroprudential Policy

This report elucidates the risk channels for EU economies associated with international financial integration and provides an overview of the macroprudential policy options that are available to address these risks.1 It builds on the main insights from the rich academic literature developed recently to create a narrative of the role of global variables for the conduct of macroprudential policy at a national level. The report reviews the evidence on the cross-border spillovers of domestic macroprudential policies (MPPs). It also highlights key policy areas for making macroprudential policy as effective as possible. Annex 1 presents findings from several new research papers across the European System of Central Banks.

A Review of Economic Analyses on the Potential Impact of Brexit

This paper summarises the economic analyses of the potential impact of Brexit on the United Kingdom, European Union (EU) and euro area performed by members of and contributors to the Brexit Task Force, a group reporting to the International Relations Committee of the European System of Central Banks. The studies were carried out between 2017 and the initial months of 2019 and have been independently published by the authors. The aim of this Occasional Paper is to present the studies in an organic manner, highlighting common features and results.

ЕВОЛЮЦІЯ БАНКІВСЬКОЇ СИСТЕМИ ЄВРОПЕЙСЬКОГО СОЮЗУ

The European banking system, established in the first postwar years, is the result and at the same time one of the important instruments of European integration and the European Monetary System. The creation of an effective banking system required not only radical changes at the legislative level of the countries that were part of the monetary union, but also the adoption of uniform requirements by all member countries. The article considers and generalizes the issue of paradigmatic standards of transformation of the European banking system. The purpose of creation of the European payment union is substantiated. The analysis of the mechanism of functioning of the European Payments Union is carried out. The reason for the creation of the European Coal and Steel Community is named. The activity and consequences of the formation of the European Economic Community are studied. The main idea of "Werner's plan" is described. The reasons for preventing the activation of the "Werner plan" are named. The consequences of the abolition of the US gold standard are highlighted. The essence of the "snake in the tunnel" is described. The reasons for the creation of the European Monetary System are named. The main elements of the European Monetary System are considered. The pros and cons of the formation of this system are summarized. The grounds for the formation of a monetary and economic union are substantiated. An analysis of the creation and operation of the Maastricht Treaty. The basic principles of the Maastricht Treaty are named. The main tasks of the European Monetary Institute are highlighted. The criteria for the participation of countries in the monetary and economic union are considered. The stages of formation of the European system of central banks are named. The activity of the European Central Bank is described. The shares of national central banks in the capital of the European Central Bank are highlighted. The main economic and political reasons for the adoption of the term "Eurosystem" by the Board of Governors are named. The structure of the Eurosystem is analyzed. The main elements of the banking union are generalized. The pros and cons of "emergency liquidity" measures in the Eurosystem are highlighted. The activity of the trans-European system of automatic transfers of gross settlements in real time – TARGET is characterized. The essence of the concept of "financial stability" is generalized.

Risk and Security of Information Systems in the Portuguese Financial Sector

This work follows the need of safety standards, update ISO27002:2013, in the major central banks of several European countries. This need has been studied by establishing a focus group that integrated European experts from major central banks. The analysis carried out was supported in the current methodology of information risk management, used by central banks in the safety management of information systems. This methodology is used to analyze and evaluate the adequacy of practices to risk management in the financial activity. The main objective was to present a proposal, sufficiently comprehensive and consistent, to a new risk management process of Information Systems within the European System of Central Banks. And a definition of a practical guide to risk management throughout the different stages of the Information Systems Life Cycle. The proposed model provides a higher degree of protection systems, technologies and information, especially in Central Banks, taking as reference the Portuguese Central Bank.

The European Central Bank’s intricate independence versus accountability conundrum in the post-crisis governance framework

In the wake of the European financial and sovereign debt crisis there is a revived interest in the constitutional position of the European Central Bank (ECB) in the European Union legal order, notably its independence and democratic legitimacy. A new generation of researchers, witnessing and in part affected by the course of events during the crisis, is currently discovering this field of research. These contemporary contributions are more than reiterations of debates at the time of the establishment of the European System of Central Banks. Indeed, the (legal) landscape pertaining to the position of the ECB has transformed significantly during the crisis, not only raising concerns about the legitimacy of the position and actions of the ECB, but, somewhat paradoxically, also about the compatibility of its functions and actions with the basic EU Treaty preference for an independent, inflation-averse and thus, conservative central bank. This contribution provides a broader picture of the independence-versus-accountability conundrum in the post-crisis governance framework by discussing main determinants of the independence and democratic legitimacy of the ECB today, as well as identifying risks emanating from the ECB’s position in the EU legal order. Based on this assessment areas of improvement are identified.

ROMANIAN INTERBANK INTEREST RATES AND CENTRAL BANK’S MONETARY POLICY

Interbank rates are affected by the monetary policy of a country and represent a link to other financial and credit markets. In 2007, Romania became a member of the European Union and its central bank, the National Bank of Romania (NBR), joined the European System of Central Banks (ESCB) but not the Eurosystem. This paper analyses the role of the central bank and the use of its instruments concerning interbank rates. The research evaluates the influence of the Romanian Central Bank on interbank rates and shows that the policy rate and bank liquidity are among the main determinants of interbank rate movements. It is also presented that the NBR’s deposit and lending rates can limit the free movements of the interbank rate of interest. This research confirms that interbank interest rates influence bank rates strongly. The methodology used in this research includes cointegration, dynamic econometric measurement and analyses with Granger causality. Our research uses mainly ROBID and ROBOR of different maturities, showing that the influence of the Romanian Central Bank (NBR) on the interbank rate is strong, while the influence of the ECB and Fed is weak.

Legal Aspects of the European Central Bank (ECB) - The ECB within the European System of Central Banks (ESCB) and the European System of Financial Supervision (ESFS)

The present study is structured in two Chapters – the first containing three Sections and the second two – as follows: (a) Chapter One focuses on the European Central Bank (ECB) within the European System of Central Banks (ESCB): • the first two Sections (A and B) briefly discuss the definition and the sources of the law of the Economic and Monetary Union (EMU), as well as the structure and operation of the ESCB, and • Section C presents then the general and the temporary (unconventional) framework governing the ECB’s single monetary policy within the Eurosystem (a sub-system of the ESCB, under 1-3). It also discusses the role of the ECB in the provision of emergency liquidity assistance (ELA) to solvent credit institutions in the euro area on the basis of the recent (2017) related ECB Agreement (under 4). (b) In Chapter Two the focus turns to the ECB within the European System of Financial Supervision (ESFS): • Section D discusses recent and ongoing developments in European banking law, identifying in particular the specific tasks conferred upon the ECB firstly with regard to the macro-prudential oversight of the EU financial system (under 1.2) and then for the micro-prudential supervision of credit institutions established (mainly but not confined to) in the euro area within the Single Supervisory Mechanism (SSM) (under 3.1), while • the SSM is presented in more details in Section E.