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After fifty years the Deutsche Bundesbank - the central bank that ruled European monetary affairs - stepped down to entrust monetary policy to the European Central Bank (ECB). The ECB is largely modelled after the Bundesbank. No doubt, this has something to do with the success of the Bundesbank in keeping inflation low. What lessons can be learnt for the ECB from the experience of the Bundesbank? The Bundesbank has been, and in the near future the ECB will be, the most important macroeconomic institution for more than two decades. The essays ask formerly taboo questions such as how independent is the Bundesbank, and reveal some evidence that the bank sometimes had to trade-off political demands and price stability. Further empirical research reveals that the Bundesbank is indeed not free from political pressure. Other writers consider the value and sense of the ECBs primary objective: maintaining price stability. Further studies consider the allegation often made against independent central banks is their lack of democratic accountability. One essay argues that there is in fact no trade off between independence and accountability; another that in this context, central bank independence is not a goal in itself, but only a means to achieve an objective set by the legislature. The authors in this book are all highly respected experts in this field, and their perspective is refreshingly interdisciplinary, linking political science and economics. The History of the Bundesbank fills a marked gap in research literature; no other book exists which thoroughly considers the important lessons to be learned from the Bundesbank for the ECB.
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