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Monetary Policy in Times of CrisisA Tale of Two Decades of the European Central Bank$
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Massimo Rostagno, Carlo Altavilla, Giacomo Carboni, Wolfgang Lemke, Roberto Motto, Arthur Saint Guilhem, and Jonathan Yiangou

Print publication date: 2021

Print ISBN-13: 9780192895912

Published to Oxford Scholarship Online: July 2021

DOI: 10.1093/oso/9780192895912.001.0001

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PRINTED FROM OXFORD SCHOLARSHIP ONLINE (oxford.universitypressscholarship.com). (c) Copyright Oxford University Press, 2022. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in OSO for personal use.date: 28 January 2022

The Foundations

The Foundations

Chapter:
(p.29) 1 The Foundations
Source:
Monetary Policy in Times of Crisis
Author(s):

Massimo Rostagno

Carlo Altavilla

Giacomo Carboni

Wolfgang Lemke

Roberto Motto

Arthur Saint Guilhem

Jonathan Yiangou

Publisher:
Oxford University Press
DOI:10.1093/oso/9780192895912.003.0002

The design of the European Central Bank (ECB) reflected a decades-long evolution of academic thinking and real-world experience concerning the optimal practice of central banking. In this chapter, we aim to unpack these influences and explain how they motivated both the drafters of the ECB’s statute and the economists in the national central banks who set the ECB up. We concentrate on the ideas that were dominant at the turn of the last century and the principles that were seen to constitute ‘good’ monetary governance, including the notion that monetary policy should focus primarily on price stability. We show how these principles were not only echoed in the EU Treaty, but also ‘hard-coded’ into the policy framework that, by the second half of the 1990s, had come to prominence in academic and policy circles: inflation targeting and its counterpart in econometrics, the New Keynesian model.

Keywords:   three high-level principles, the model of reference, the policy framework of reference, lessons from theory for institutional design, designing the ECB, the Treaty

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