Ecb Monetary Policy

Monetary Policy
The European Central Bank

Organization
European System of Central Banks
European Central Bank (ECB)

Malta Greece Spain Ireland Bulgaria Sweden Denmark

Slovenia France Slovakia Austria Latvia Poland Romania

Finland Estonia Germany

Cyprus

Netherlands Hungary Lithuania

United Kingdom Czech Republic

Eurosystem
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Belgium

Italy

Portugal

Luxembourg

Decision-Making
THE DECISION-MAKING BODIES OF THE ECB
EXECUTIVE BOARD
President Vice-President Four other members

GOVERNING COUNCIL
Executive Board Governors of the EURO area NCBs

GENERAL COUNCIL
President Vice-President Governors of the EU Member NCBs

 Prepares meetings of the Governing Council  Implements monetary policy  Manages day-to-day business  Exercises certain powers

 Formulates monetary policy  Adopts guidelines and makes decisions to ensure the performance of the Eurosystem ESCB Commitees

 Has no responsibility for monetary policy  Tasks of former EMI  Reports about progress towards convergence  Advises preparation for adopting Euro

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Mandate of the Eurosystem - Two-Pillar Approach
The primary objective is to maintain price stability.
Without prejudice to this objective, the Eurosystem shall support the general economic policies of the European Community.

Makes the monetary policy decisions based on an overall assessment of the risks to price stability

Governing Council

ECONOMIC ANALYSIS on the economic dynamics and shocks

cross-checking

MONETARY ANALYSIS on monetary trends

Full set of information
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Comparison: FED and the Eurosystem
Topic decision-making Eurosystem Governing Council FED FOMC

€: all NCBs are allowed to vote equally $: 5 out of 12 reserve banks are allowed to vote  Executive Board has less power than the Board of Governors objectives Price stability Multiple objectives

 FED is more flexible than the Eurosystem Implementation Decentralized Centralized

References:  Daniela Garbor; “The ECB and the Eurozone debt crisis” available at http://www.academia.edu/868218/The_ECB_and_the_European_Debt_Crisis  Daniel L. Thornton; “The Federal Reserve’s Response to the Financial Crisis: What It Did and What It Should Have Done“; Working Paper 2012-050A; October 2012; available at http://research.stlouisfed.org/wp/2012/2012-050.pdf  Christopher J. Neely; “The European Debt Crisis and Its Implications for the United States”; The University of Missouri–St. Louis, St. Louis, MO; September 13, 2012 Page 20