scholarly journals Central Banks Caught Between Market Liquidity and Fiscal Disciplining: A Money View Perspective on Collateral Policy

2021 ◽  
Author(s):  
Jakob Vestergaard ◽  
◽  
Daniela Gabor ◽  
Keyword(s):  
Central Bank ◽  
Risk Taking ◽  
Sovereign Debt ◽  
Debt Crisis ◽  
Central Banks ◽  
Crisis Response ◽  
Market Liquidity ◽  
Monetary Policies ◽  
European Central ◽  
Point Of Departure

Despite much attention to unconventional monetary policies after the financial crisis, the collateral policies of central banks are rarely discussed. And when they are, the haircuts applied to assets pledged to access central bank liquidity tend not to be analyzed. An exception to these trends is the recent work by Nyborg (2017), who argues that the collateral policies adopted by the European Central Bank (ECB) aggravated the sovereign debt crisis and put the survival of the euro at risk. Taking our point of departure in the money view literature (Mehrling 2011), we argue however that Nyborg’s critique of the ECB’s crisis response is misguided and that his proposal to deepen and reinforce the ECBs role in the fiscal disciplining of member states would be procyclical and destabilizing. Through our analysis of Nyborg’s work and the ECBs crisis response, we identify core principles for countercyclical collateral policies suitable for market-based financial systems.

scholarly journals The democratic deficit and European Central Bank crisis monetary policies

2019 ◽  
Vol 26 (1) ◽  
pp. 81-93 ◽  
Author(s):  
Anna-Lena Högenauer ◽  
David Howarth
Keyword(s):  
Central Bank ◽  
Sovereign Debt ◽  
European Central Bank ◽  
Policy Making ◽  
Debt Crisis ◽  
Democratic Legitimacy ◽  
Sovereign Debt Crisis ◽  
Monetary Policies ◽  
European Central ◽  
International Financial Crisis

This article presents the argument that European Central Bank (ECB) policy-making from the start of the sovereign debt crisis in 2010 undermined the democratic legitimacy of the ECB. We start with the argument – defended by a number of scholars including Majone and Moravcsik – that where European Union (EU) policy-making is technocratic and does not have significant redistributive implications it can benefit from depoliticization that does not undermine the democratic legitimacy of this policy-making. This is notably the case where EU institutions have narrow mandates and are constrained by super-majoritarian decision-making. Prior to the international financial crisis, the ECB’s monetary policies were shaped entirely by the interpretation that its mandate was primarily to ensure low inflation. From the outbreak of the sovereign debt crisis, the ECB adopted a range of policies which pushed its role well beyond that interpretation and engaged in a form of redistribution that directly undermined treaty provisions.

scholarly journals The Financial Crisis Response. Comparative Analysis Between European Union And USA

2017 ◽  
Vol 10 (1) ◽  
pp. 129-155 ◽  
Author(s):  
Florentina Melnic
Keyword(s):  
Risk Taking ◽  
Inflation Rate ◽  
Banking System ◽  
Central Banks ◽  
Crisis Response ◽  
Bond Markets ◽  
Real Economy ◽  
Monetary Policies ◽  
Policy Makers ◽  
The Impact

Abstract This paper reviews the measures adopted by central banks from the most important economies during the crisis and assess their effectiveness. It is important for policy makers to identify which measures were effective in limiting the financial system distress in order to adopt the appropiate measure during future crisis. In case of US, TARP was the most important program for banking system and it was effective in reducing banks’ contribution to systemic risk and banks’ default probabilities. But TARP also conducted to a reduction in loans growth and create incentives for higher risk-taking behavior. The unconventional monetary policies adopted by ECB during the period 2008- 2016 reduced the impact of the crisis on the European economy and achieved their objectives: to support banks’ funding and to increase lending to real economy (LTROs), to calm tensions from bond markets (CBPP, SMP, OMT), to support economic activity and to stabilize inflation rate (SMP, OMT, LTROs, APP).

The European Central Bank

2020 ◽  
Author(s):  
Michael Ioannidis
Keyword(s):  
Central Bank ◽  
Sovereign Debt ◽  
European Central Bank ◽  
Debt Crisis ◽  
Central Banking ◽  
Defining Moment ◽  
European Central ◽  
Economic Constitution ◽  
Rules And Principles ◽  
History Of

The European Central Bank (ECB) is the only central bank governed by supranational constitutional law. As such, it is not only the most important institution of the Economic and Monetary Union (EMU), but it also marks a new stage in the history of central banking in general. Historically, the tasks and functions of the ECB have reflected the different stages of development of the EMU. The basic principles governing its function were set out in Maastricht, reflecting the interests and ideas about Europe’s economic constitution prevailing at that time. The sovereign debt crisis that hit Europe in 2010 was the second defining moment for the ECB after Maastricht. It posited the ECB–like the rest of the EMU–to challenges that some of the drafters of the Maastricht Treaty had not fully anticipated. These new challenges led to the adoption of novel instruments and the further clarification of fundamental rules and principles. Most important of these developments was the entrustment of the ECB with a new task, banking supervision, and the adoption of unconventional measures, which proved necessary to fulfil its monetary-policy mandate. Ultimately, not only did the ECB withstand the crisis but it emerged as a protagonist in securing the unity and integrity of the EMU.

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

2019 ◽  
Vol 26 (1) ◽  
pp. 165-179 ◽  
Author(s):  
Fabian Amtenbrink
Keyword(s):  
Central Bank ◽  
Sovereign Debt ◽  
Debt Crisis ◽  
Legal Order ◽  
Democratic Legitimacy ◽  
The European Union ◽  
Governance Framework ◽  
European Central ◽  
Main Determinants ◽  
New Generation

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.

scholarly journals How have the European central bank’s monetary policies been affecting financial markets in CEE-3 countries?

2020 ◽  
Author(s):  
Wojciech Grabowski ◽  
Ewa Stawasz-Grabowska
Keyword(s):  
Central Bank ◽  
Financial Markets ◽  
Sovereign Debt ◽  
European Central Bank ◽  
Spillover Effects ◽  
Monetary Policies ◽  
The Czech Republic ◽  
Sovereign Bond ◽  
European Central ◽  
Daily Data

AbstractThis paper aims to contribute to the growing pool of literature on the spillover effects of the European Central Bank’s (un)conventional monetary policies on the exchange rate, sovereign bond and equity markets of the Czech Republic, Hungary and Poland (CEE-3 countries), which are collectively known as the CEE-3 countries. The study is conducted using daily data from January 2010 to September 2019. Our results indicate that the financial markets of the CEE-3 countries have been strongly influenced by the nonstandard measures enacted by the European Central Bank, particularly those involving purchases of euro-area sovereign debt. The strongest spillover effects were identified for the Securities Markets Program, while the effects from the Outright Monetary Transactions program turned out to be the most durable. At the same time, the financial markets of the CEE-3 countries were found to have been largely unaffected by interest rate changes enacted by the European Central Bank.

scholarly journals Unconventional Monetary Policies: Lessons from the Past and the Present to Future Monetary Policy Frameworks

2020 ◽  
Vol 6 (1) ◽  
pp. 73-99
Author(s):  
Cristiano Boaventura Duarte ◽  
André Modenesi ◽  
Antonio Licha ◽  
Emmanuel Carré
Keyword(s):  
Monetary Policy ◽  
Adverse Effects ◽  
Central Bank ◽  
European Central Bank ◽  
Central Banks ◽  
Evolutionary Perspective ◽  
Monetary Policies ◽  
European Central ◽  
The Past ◽  
Policy Frameworks

This article intends to debate important aspects related to past and recent experiences of monetary policy accommodation, focusing on unconventional monetary policies. We intend to draw lessons from these experiences to discuss the design of future monetary policy frameworks.First, by reporting several historical experiences of major central banks, we highlight that policies which after 2008 crisis were considered “unconventional” were not new, with central banks intervening to avoid broader deterioration of macro-financial conditions.Moreover, analyzing the experience of the European Central Bank after 2008, we observe this institution has adapted its measures according to its former programs and to other central banks' experiences, to face numerous challenges and enhance its framework. Finally, we argue that central banks need to take advantage of past and recent experiences to improve the design of their future monetary policy frameworks under an evolutionary perspective. Based on this, measures previously implemented would have three possible destinations in new frameworks: i) Be discarded, due to their predominantly adverse effects; ii) Not be regularly implemented, but be kept as backstop mechanisms if needed; iii) Be incorporated as regular measures of monetary policy frameworks.

scholarly journals THE MONETARY POLICY OF THE EUROPEAN CENTRAL BANK IN THE PERIOD OF SOVEREIGN DEBT CRISIS

Ekonomika ◽  
2013 ◽  
Vol 92 (2) ◽  
pp. 20-31
Author(s):  
Deimantė Andriuškevičiūtė ◽  
Norbertas Balčiūnas
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Credit Risk ◽  
Sovereign Debt ◽  
European Central Bank ◽  
Debt Crisis ◽  
Balance Sheet ◽  
Sovereign Debt Crisis ◽  
Government Bonds ◽  
European Central

Abstract. The European Central Bank was forced to start using non-standard measures in order to manage the situation determined by the global financial and sovereign debt crisis, namely to sort out liquidity problems and expand credit supply. The European Central Bank is criticized for applying non-standard tools because of increase in inflation risk. However, the analysis shows that the inflation could be managed by the absorption of liquidity surplus. However, there is a negative side of using non-standard measures, such as a significant increase in the credit risk, which arises due to having government bonds in the balance sheet of the European Central Bank. In addition, this indicates that the European Central Bank indirectly finances governments.Key words: monetary policy, inflation, sovereign debt crisis, credit risk, quantitative easing

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