International monetary stability: a coordination among central banks or a global central bank of central banks? PDF Stampa E-mail
Scritto da Angelo L.   
Lunedì 07 Aprile 2014 08:49

«Inflation at 0.8% across the Eurozone is below the target of ‘close to 2%’, and unemployment in most countries is still high.» […] «The question is how the ECB can ease, since short term interest rates are already close to zero. Most of the talk in Europe is around proposals for the ECB to undertake Quantitative Easing (QE), following the path of the Fed and the Bank of Japan, expanding the money supply by buying the government bonds of member countries»

[…] «QE would present a problem for the ECB that the Fed and other central banks do not face. The Eurozone has no centrally issued and traded Eurobond that the central bank could buy […] That would mean that the ECB would have to buy bonds of member countries, which in turn means taking implicit positions on the creditworthiness of their individual finances. Germans tend to feel that ECB’s purchase of bonds issued by Greece and other periphery countries constitutes monetary financing of profligate governments and violates the laws under which the ECB was established.[…] What, then, should the ECB buy, if it is to expand the monetary base? It should not buy euro securities, but rather US treasury securities. In other words, it should go back to intervening in the foreign exchange market. Here are several reasons why […] Monetary expansion that depreciates the currency is effective. It is more effective than monetary expansion that does not, especially when, as at present, there is very little scope for pushing short-term interest rates much lower.[…] As the Fed tapers back on its purchases of US treasury securities, it is a perfect time for the ECB to step in, and buy some itself.» (Jeffrey Frankel, Considering QE, Mario? Buy US bonds, not Eurobonds, 24 March 2014,

In this article it is proposed a sort of international quantitative easing for ECB. The author proposes a new expansive monetary politics: a central banks should have some advantage in realizing a quantitative easing acquiring bond issued by foreign government. In particular the author proposes that ECB should acquire t-bills issued by US government. Even if the idea can be suggestive, it is hard to understand what can be the improvements for the economic conditions of European citizens. In the mind of the author acquiring t-bills should let ECB overcome legal limits posed from European courts, especially from German Constitutional Court This is questionable. The German constitutional court has considered unconstitutional the “ECB’s purchase of Greek bonds”. Why should the German constitutional court consider constitutional the ECB’s purchase of US bonds? Even the ECB’s purchase of US bonds can be considered as a “monetary financing” of a national economy, even if a national foreign economy. But the question is not only a legal question. The ECB’s purchase of US bonds proposed by the author should be evaluated in a purely economic framework. The economic debate in Europe affords the question of the ability of the ECB to implement some kind of monetary policy able to improve the economic development of “Pigs” and in general able to have a positive effect on employment and economic growth. Euro-critics believe that ECB should have some mandate in improving the condition of public finance especially during a crisis. Europeans tends to imagine a ECB able to fight poverty and social exclusion. Euro-critics believe that the political mandate of ECB should be improved is a social oriented framework. If ECB acquires US bond what can be the effects t in terms of unemployment, reduction of poverty and social inclusion? The author argues that acquiring US bonds can be considered as a monetary policy devoted to depreciate the value of euro. The depreciation can be positive in increasing the level of exports and in this sense can produce more jobs, reducing poverty, improving social inclusion. Even if all these effects can be real, they are not able to solve the problem of idiosyncratic growth in Eurozone. In effect we can ask: which are the countries that can have advantages from a ECB’s purchase of US bods? They are the country able to exports. And which are the countries able to export? Germany, first of all. So in this sense the ECB’s purchase of US bonds is a monetary policy based on a foreign quantitative easing able to improve the exports capacity of German industry. But what should happens to other European countries such as Portugal, Greek? They should hope to have the advantage of a sort of “trickle down” from the improving of German exportations, and probably they will ask to central bank a new intervention, in a second time. ECB’s purchases of US bonds can be improve German exportations, but at the same time can increase the economic divergence within Eurozone. This should request a new intervention of ECB, but at a higher cost in terms of efficiency and time-consuming.

The idea of having a coordination among central banks is positive in the sense of international monetary sustainability even if we can ask if this order should be cooperative or hierarchical (i.e a central bank of central banks). The building process of an international order based on central banks should be realized with a deeper institutional dialogue.

Ultimo aggiornamento Lunedì 07 Aprile 2014 08:53
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