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Two Naked Emperors? Concerns about the Stability & Growth Pact and Second Thoughts about Central Bank Independence

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  • Willem H. Buiter

Abstract

This paper addresses two sets of issues relevant to current and prospective future E(M)U members: the consequences of the Stability & Growth Pact for fiscal-financial sustainability and macroeconomic stability, and some risks associated with operational independence of the central bank. To be effective as a lender of last resort or to stabilise demand when short nominal interest rates are close to their zero lower bound, the central bank must coordinate and cooperate with the fiscal authorities. Central bank independence is unlikely to survive if such coordination and cooperation are not forthcoming.

Suggested Citation

  • Willem H. Buiter, 2004. "Two Naked Emperors? Concerns about the Stability & Growth Pact and Second Thoughts about Central Bank Independence," Fiscal Studies, Institute for Fiscal Studies, vol. 25(3), pages 249-277, September.
    • Handle: RePEc:ifs:fistud:v:25:y:2004:i:3:p:249-277
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    Cited by:

    1. Buiter, Willem H., 2007. "Seigniorage," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 1, pages 1-49.
    2. Bagus, Philipp & Howden, David, 2014. "Central Bank Insolvency: Causes, Effects and Remedies," MPRA Paper 79605, University Library of Munich, Germany.
    3. Buiter, Willem, 2014. "Central Banks: Powerful, Political and Unaccountable?," MPRA Paper 59477, University Library of Munich, Germany.
    4. Jakob Korbinian Eberl, 2016. "The Collateral Framework of the Eurosystem and Its Fiscal Implications," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 69.
    5. Lisa Fingland & Stephen J. Bailey, 2008. "The EU's Stability and Growth Pact: Its Credibility and Sustainability," Public Money & Management, Taylor & Francis Journals, vol. 28(4), pages 223-230, August.
    6. repec:spo:wpmain:info:hdl:2441/1fsnu13sl59jsautsd9gpjrj59 is not listed on IDEAS
    7. Fiorella Kostoris Padoa Schioppa, 2006. "The 2005 Reform of the Stability and Growth Pact: Too Little, Too Late?," Bruges European Economic Research Papers 6, European Economic Studies Department, College of Europe.
    8. Kathryn M. E. Dominguez, 2006. "The European Central Bank, the Euro, and Global Financial Markets," Journal of Economic Perspectives, American Economic Association, vol. 20(4), pages 67-88, Fall.
    9. Buiter, Willem, 2006. "How Robust is the New Conventional Wisdom? The Surprising Fragility of the Theoretical Foundations of Inflation Targeting and C," CEPR Discussion Papers 5772, C.E.P.R. Discussion Papers.
    10. Bagus, Philipp & Howden, David, 2014. "Fiscal Considerations of Central Bank Recapitalization," MPRA Paper 79606, University Library of Munich, Germany.
    11. Buiter, Willem, 2008. "Can Central Banks Go Broke?," CEPR Discussion Papers 6827, C.E.P.R. Discussion Papers.
    12. Christophe Blot & Jérôme Creel & Paul Hubert, 2019. "Thoughts on a review of the ECB's monetary policy strategy," Working Papers hal-03403251, HAL.
    13. repec:hal:spmain:info:hdl:2441/1fsnu13sl59jsautsd9gpjrj59 is not listed on IDEAS

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