The Monetary of European Central Bank
A Literature Review of European Central Bank’s Monetary Policy
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Introduction
The European Central Bank (ECB) was established in June 1998, as the core of European System of Central Banks (ESCB), ECB formally centralized the European monetary policies since January 1999. This new monetary authority is quite different from any traditional sovereign central banks, for its operational independence and its independence from political interference are guaranteed by the European Union Treaty. Besides, the supranational organizational attribution make it has the only responsibility for monetary policy in the whole euro zone, which now consist of eighteen member states of the European Union. During the sixteen years since its establishment, ECB has confronted several economic fluctuations, especially the global financial crisis in 2008 and sovereign debt crisis since 2010. The ECB plays an important role in the conduct of its main strategies and tools of monetary policy to stabilise the euro currency in the crisis.
The strategies of ECB
The monetary policy strategy of ECB is price stability-oriented (Bordes, Christian and Clerc, 2007). The Maastricht Treaty defined that the ECB's ultimate objective is price stability. The ECB’s monetary policy strategies consist of three key components: a quantitative definition of price stability, a prominent role for money in the assessment of risks to price stability, and a broadly based assessment of the outlook for price developments (Gradinaru, Cristian, 2009).
1. Price Stability
Since the birth of euro in 1999, the ESCB has set up its primary task for maintaining price stability. According to the Maastricht Treaty, the primary objective of ECB is to keep price stability in the entire euro area. And other objectives to be pursued by the ECB, in particular those more involved in output and high employment in the euro economy, should only be addressed if price stability is
FIN11128
Introduction
The European Central Bank (ECB) was established in June 1998, as the core of European System of Central Banks (ESCB), ECB formally centralized the European monetary policies since January 1999. This new monetary authority is quite different from any traditional sovereign central banks, for its operational independence and its independence from political interference are guaranteed by the European Union Treaty. Besides, the supranational organizational attribution make it has the only responsibility for monetary policy in the whole euro zone, which now consist of eighteen member states of the European Union. During the sixteen years since its establishment, ECB has confronted several economic fluctuations, especially the global financial crisis in 2008 and sovereign debt crisis since 2010. The ECB plays an important role in the conduct of its main strategies and tools of monetary policy to stabilise the euro currency in the crisis.
The strategies of ECB
The monetary policy strategy of ECB is price stability-oriented (Bordes, Christian and Clerc, 2007). The Maastricht Treaty defined that the ECB's ultimate objective is price stability. The ECB’s monetary policy strategies consist of three key components: a quantitative definition of price stability, a prominent role for money in the assessment of risks to price stability, and a broadly based assessment of the outlook for price developments (Gradinaru, Cristian, 2009).
1. Price Stability
Since the birth of euro in 1999, the ESCB has set up its primary task for maintaining price stability. According to the Maastricht Treaty, the primary objective of ECB is to keep price stability in the entire euro area. And other objectives to be pursued by the ECB, in particular those more involved in output and high employment in the euro economy, should only be addressed if price stability is
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