Philippe Moutot

How are the Eurosystem's Monetary Policy Decisions Prepared? A Roadmap

The monetary policy framework of the Eurosystem has received considerable attention in recent years: there is a well-established and rich literature on the price stability objective, as well as the two-pillar strategy of the ECB. This is less the case for the regular monetary policy preparations and the decision-making process. This article provides an insiders roadmap to the procedures to prepare monetary policy decisions by the Governing Council of the ECB. The architecture of the Eurosystem permits the processing and analysis of a vast amount of national and aggregate economic, financial and monetary data and assists the Governing Council in taking monetary policy decisions – and this each month. Our aim is to describe the role of a variety of committees and sub-committees that prepare and support the monetary policy decision-making process. A federal organization is at the heart of this process. At the top of the pyramid of information there is a two-tiered committee structure with the Executive Board taking the lead in bringing together most of the economic, financial and monetary analyses, and the Governing Council utilizing that information, for its monthly economic and monetary analyses.

Monetary Policy and Co-ordination in a Globalised World

This paper addresses the implications for monetary policies aimed at price stability in an international environment characterised by a high degree of interdependence among different economic areas. The paper argues that the optimal design of the monetary policy strategy has to combine rules with discretion so as to reflect both the characteristics of domestic economies in a globalised world and the need for efficient communication. The flexibility of the monetary policy strategy also has important implications for international monetary policy co-ordination. Recognising that, at least for large economic areas, “classic” monetary policy co-ordination is not feasible, the paper argues that, instead, monetary policy co-operation, i.e. the exchange of information and views without definite policy commitments, can significantly enhance the efficiency of monetary policy measures. In this respect, any system of co-operation between central banks, if it is to be efficient, requires the various international fora in which such co-operation takes place to be designed and function appropriately. It should be recognised, however, that smaller countries might welcome a “weaker” form of co-ordination consisting in pegging the exchange rate of their currency to the currency of a larger and more stable country.

Power of Inaction or Ability to Learn in Action within a Political Process? Comments on 'The Power of Inaction' by Cornelia Woll

Abstract How to best describe and assess the result of a bailout process? The author argues that the power of inaction of banks while relevant, as argued by Cornelia Woll in her book, is not sufficient to characterize the result of a bailout process. As such result should encompass financial stability and business cycle considerations, the power of inaction of banks needs to be viewed in combination with the ability of authorities to learn in action and the quality of the legal and political process that accompanies such learning.