Open Access Journal Article

The effectiveness of the european central bank in pursuing its prime mandate

by Mark Scholliers a,* orcid  and  Herman Matthijs a,b
a
Universiteit Gent, Gent, Belgium
b
Vrije Universiteit Brussel, Brussel, Belgium
*
Author to whom correspondence should be addressed.
EAL  2024 3(2):52; https://doi.org/10.58567/eal03020001
Received: 15 August 2023 / Accepted: 14 October 2023 / Published Online: 15 June 2024
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Abstract

The objectives and tasks of the European Central Bank (ECB) are defined in Articles 2 and 3 of Protocol (No 4) on the Statute of the European System of Central Banks (ESCB) and of the European Central Bank (ECB). While in Article 3,1° of this Protocol other tasks are mentioned, the prime objective of the ESCB and therefore of the ECB, is price stability. This concept was originally specified by the Executive Board of the ECB as an annual increase of less than 2% in the inflation rate over the medium term, measured by the Harmonized Index of Consumer Prices (HICP) for the euro area. This paper examines to what extent the ECB has been effective in realizing price stability over the period from January 1, 2000 to December 31, 2022. Price stability is important for economic agents. It allows them to plan their savings, spending and investment eventually resulting in sustained economic growth.   Notwithstanding the commitment of large human and other resources and the use of unconventional monetary policies, the ECB did not realize its prime objective during a large part of this period. We conclude that putting too much confidence in DSGE-modeling as one of the methodologies to determine monetary policy, may have played an important role in the ECB not achieving its main statutory objective.

Keywords: Effectiveness; central bank; inflation targeting; price stability; monetary instruments;
Copyright: © 2024 by Scholliers and Matthijs. This is an open-access article distributed under the terms of the Creative Commons Attribution License (CC BY) (Creative Commons Attribution 4.0 International License). The use, distribution or reproduction in other forums is permitted, provided the original author(s) or licensor are credited and that the original publication in this journal is cited, in accordance with accepted academic practice. No use, distribution or reproduction is permitted which does not comply with these terms.

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ACS Style
Scholliers, M.; Matthijs, H. The effectiveness of the european central bank in pursuing its prime mandate. Economic Analysis Letters, 2024, 3, 52. https://doi.org/10.58567/eal03020001
AMA Style
Scholliers M, Matthijs H. The effectiveness of the european central bank in pursuing its prime mandate. Economic Analysis Letters; 2024, 3(2):52. https://doi.org/10.58567/eal03020001
Chicago/Turabian Style
Scholliers, Mark; Matthijs, Herman 2024. "The effectiveness of the european central bank in pursuing its prime mandate" Economic Analysis Letters 3, no.2:52. https://doi.org/10.58567/eal03020001
APA style
Scholliers, M., & Matthijs, H. (2024). The effectiveness of the european central bank in pursuing its prime mandate. Economic Analysis Letters, 3(2), 52. https://doi.org/10.58567/eal03020001

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