The European Central Bank: A Bank or a Monetary Policy Rule / David Folkerts-Landau, Peter M. Garber.

Format:

Book

Author/Creator:

Folkerts-Landau, David.

Contributor:

National Bureau of Economic Research.

Garber, Peter M.

Series:

Working Paper Series (National Bureau of Economic Research) no. w4016.

NBER working paper series no. w4016

Language:

English

Subjects (All):

Banks and banking, Central.

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

The European Central Bank

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1992.

Cambridge, Mass. : National Bureau of Economic Research, 1992.

Summary:

A European central banking institution will be an essential feature of the final stage of the European Economic and Monetary Union. The EC Committee of Central Bank Governors has recently produced a Draft Statute of the European System of Central Banks and of the European Central Bank. The draft Statute mandates the maintenance of price stability as the explicit primary objective of the ECB. and the necessary monetary functions and operations of the system are defined in accordance with standard practice. The maintenance of a stable financial and payments system, however. is not an explicit objective of the ECB. and only limited banking functions are admitted as one of the system's tasks. The draft Statute clearly subscribes to a "narrow" concept of the System of Central Banks with a single objective-monetary stability-rather than a "broad" concept with the additional objective of financial-market stability. In this paper we examine the consequences of a "narrow" central banking system for Community financial markets, We conclude that in the absence of such banking functions it will be necessary to slow or even prevent the ongoing development of Community-wide liquid. securitized financial markets, supported by a large-volume wholesale payments system. Instead, the historically prevalent bank-intermediated financial system will have to be maintained to lower the likelihood of liquidity crises that demand central bank intervention.

Notes:

Print version record

March 1992.

Includes bibliographical references.