University of Twente Student Theses


Die Geldpolitik der Europäischen Zentralbank im Spannungsfeld von Inflation und Wachstum

Zeddies, Maja-Luise (2008) Die Geldpolitik der Europäischen Zentralbank im Spannungsfeld von Inflation und Wachstum.

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Abstract:The grounding of the European Coal and Steel Community (ECSC) in 1950 was based upon economic issues, like the increase in economic welfare. With the Rome Treaty in 1957 the European Economic Community emerged. In 1978 an European currency system was developed. The Single European Act was signed in 1986 to establish a Single European Market by 1992, by removing the barriers to free movement of capital, labour, goods and services. The Euro was introduced to world financial markets as an accounting currency in 1999 and launched as physical coins and banknotes in 2002. This is a short narration of the European economic history, the European Central Bank (ECB) is a part of. Today, the European economic history last for more than 50 years and now, in 2008 the ECB works as a very independent bank for 10 years. The ECB founded in 1998/1999 and based in Frankfurt is responsible for the price stability within the euro zone that consists of the ECB and 15 National Central Banks of the participating member states. Therefore the ECB uses a two-pillar approach as the monetary strategy. This approach resists on a monetary and an economic analysis and uses the theoretical background of monetary and inflation targeting. Therefore it is a very complex strategy, with which the central aim - price stability - should be achieved. Also transparency, accountability and credibility are important components, in order to satisfy the participating member states and provide their confidence. But how does the monetary policy of the bank work? How does the so called “stability-oriented monetary policy strategy of the ECB” work? What is meant with the two pillars of the strategy? Is there criticism of the strategy and which is it? These are the questions the paper is going to deal with. The aim of the paper is to describe the ECB and the monetary strategy which is used. Also the area of conflict between inflation and growth, in which the ECB has to work, should be explained. Moreover the issue, if there is a need for an amendment of the ECB’s strategy, should be pursued. The paper starts with an introduction on the history. After that the composition, duties, aims and responsibilities of the European Central Bank are discussed. Therefore the European System of Central Banks (ESCB) and the institutions of the ECB are described. After that it responds to the aims of the ECB. In this context the functions of transparency, accountability and credibility and the definition and 5 benefits of price stability are demonstrated. Also the monetary Instruments are explained and presented. The next part deals with the aspects, which have to be considered by the adoption and selection of the monetary strategy. A description of the monetary strategies: Monetary Targeting, Inflation Targeting and the two-pillar approach, used by the ECB, follows. Afterwards the advantages, disadvantages and criticism on the two-pillar approach are discussed. The paper ends with a conclusion which sums up the most important points.
Item Type:Essay (Bachelor)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:88 social and public administration
Programme:European Studies BSc (56627)
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