Democracy of the European Central BankHeikki Rannikko's seminar paper on European Central Bank |
IntroductionThe main purpose of this study is to analyse different aspects of central bank independence and what independence means for the democratic governance of the European Central Bank. In addition I will introduce "the New Zeland -model" of central banking and analyze New Zealand's Federal Bank's record in achieving inflation targets. |
Theoretical aspects of Central Bank independenceOne aim of a central bank is to try to influence the supply and demand situation in financial markets in order to provide stability and a stable base for sustainable economic growth. How this aim will be achieved, depends inter alia on the institutional structure of the global financial system. In this section I will look at the institutional framework of monetary system and thereafter the theoretical principles for central bank independence and democracy. |
| A general framework for monetary policy |
| The independence of a central bank |
| Democracy of an independent central bank |
Independence and democracy of the European Central BankThe European Central bank is an interesting institution, because it only exists in plans and is not altogether sure if it will exist at all. Some might argue that it will possess formalist bias in the analyses. However, if one assumes legal status of the bank as a proxy for its politics in reality, it is justifiable to analyse the independence and democracy of the European Central Bank. |
| Institutions and structures of the European Central Bank |
| Independence of the European Central Bank |
| Democracy of the European Central Bank |
Democratic choice for Central Banking, the New Zealand -modelNew Zealand has been the last decade's famous example for a successful change in the central banking legislation. In this chapter I will briefly analyse what kind of a central bank legislation this is and how it has affected the operation of the economy. Because the information channels and appointment procedures do not differ considerably from those of e.g. planned ECB, we will concentrate here on the formal agreement for the goal setting. |
| Reserve Bank Act, 1989 |
| Performance of the Federal Bank in achieving Inflation |
SummaryIt is very hard to see that anybody could advocate the principle of price stability, whether one believes in free a market economy or not. It is common sensical that money, the pieces of paper maintain the value that is printed on them. One could imagine what would happen if any other unit of measurement would change from time to time, depending on the ruling government. With right wing parties in charge a meter would be only 90 cm and with left wing parties in charge a meter would be 110 cm. Certainly the working of the economy would be severely damaged by the loss of confidence in the size of the basic unit of measurement. |
Bibliography |