IDEAS home Printed from https://ideas.repec.org/p/hal/spmain/hal-03470271.html
   My bibliography  Save this paper

Challenges for the ECB in Times of Deflation

Author

Listed:
  • Francesco Saraceno

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

Abstract

This paper assesses the performance of the European Central Bank (ECB) during the crisis that started in 2008. The ECB statute is consistent with a view of the economy that was predominant in the 1990s, a view that postulates a very limited role for discretional policies in managing the business cycle. The ECB had therefore to stretch its mandate on several occasions during the crisis to avoid severe outcomes. It was unable to avoid a slow but inexorable slide of the Eurozone towards deflation and a liquidity trap. To restore robust growth, fiscal policy should be used, and institutions should be redesigned away from the Washington Consensus framework that shaped the Maastricht Treaty. Better rules for fiscal governance and a widening of the ECB mandate are proposed.

Suggested Citation

  • Francesco Saraceno, 2015. "Challenges for the ECB in Times of Deflation," SciencePo Working papers Main hal-03470271, HAL.
    • Handle: RePEc:hal:spmain:hal-03470271
    Note: View the original document on HAL open archive server: https://hal-sciencespo.archives-ouvertes.fr/hal-03470271
    as

    Download full text from publisher

    File URL: https://hal-sciencespo.archives-ouvertes.fr/hal-03470271/document
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ben S. Bernanke & Mark Gertler, 2001. "Should Central Banks Respond to Movements in Asset Prices?," American Economic Review, American Economic Association, vol. 91(2), pages 253-257, May.
    2. Jean‐Paul Fitoussi & Francesco Saraceno, 2008. "Fiscal Discipline as a Social Norm: The European Stability Pact," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 10(6), pages 1143-1168, December.
    3. Olivier Blanchard & Giovanni Dell'Ariccia & Paolo Mauro, 2010. "Rethinking Macroeconomic Policy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(s1), pages 199-215, September.
    4. repec:hal:wpspec:info:hdl:2441/9909 is not listed on IDEAS
    5. Blot, Christophe & Creel, Jérôme & Hubert, Paul & Labondance, Fabien & Saraceno, Francesco, 2015. "Assessing the link between price and financial stability," Journal of Financial Stability, Elsevier, vol. 16(C), pages 71-88.
    6. Jean-Paul Fitoussi & Francesco Saraceno, 2011. "Inequality, the Crisis and After," Rivista di Politica Economica, SIPI Spa, issue 1, pages 9-27, January-M.
    7. Jean-Paul Fitoussi & Francesco Saraceno, 2011. "Inequality, the Crisis and after," SciencePo Working papers hal-03415498, HAL.
    8. Cukierman, Alex, 2013. "Monetary policy and institutions before, during, and after the global financial crisis," Journal of Financial Stability, Elsevier, vol. 9(3), pages 373-384.
    9. Adrian, Tobias & Shin, Hyun Song, 2010. "Liquidity and leverage," Journal of Financial Intermediation, Elsevier, vol. 19(3), pages 418-437, July.
    10. Jean-Paul Fitoussi & Francesco Saraceno, 2013. "European economic governance: the Berlin–Washington Consensus," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 37(3), pages 479-496.
    11. Angel Ubide, 2013. "How to Form a More Perfect European Banking Union," Policy Briefs PB13-23, Peterson Institute for International Economics.
    12. Philip Lowe & Claudio Borio, 2002. "Asset prices, financial and monetary stability: exploring the nexus," BIS Working Papers 114, Bank for International Settlements.
    13. Philip R. Lane, 2000. "Asymmetric Shocks and Monetary Policy in a Currency Union," Scandinavian Journal of Economics, Wiley Blackwell, vol. 102(4), pages 585-604, December.
    14. repec:hal:spmain:info:hdl:2441/9909 is not listed on IDEAS
    15. Jérôme Creel & Paola Monperrus‐Veroni & Francesco Saraceno, 2009. "On The Long‐Term Effects Of Fiscal Policy In The United Kingdom: The Case For A Golden Rule," Scottish Journal of Political Economy, Scottish Economic Society, vol. 56(5), pages 580-607, November.
    16. Fabrizio Balassone & Daniele Franco, 2000. "Public investment, the Stability Pact and the ‘golden rule’," Fiscal Studies, Institute for Fiscal Studies, vol. 21(2), pages 207-229, June.
    17. Olivier Blanchard & Giovanni Dell'Ariccia & Paolo Mauro, 2010. "Rethinking Macroeconomic Policy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(s1), pages 199-215, September.
    18. repec:hal:spmain:info:hdl:2441/114p6m6s0395gqm0es4g7kgv3u is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Francesco Saraceno, 2015. "Challenges for the ECB in Times of Deflation," Working Papers hal-03470271, HAL.
    2. Francesco Saraceno, 2016. "The ECB: a reluctant leading character of the EMU play," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 33(2), pages 129-151, August.
    3. repec:hal:spmain:info:hdl:2441/60msq70is4953b2qsr30bh7c11 is not listed on IDEAS
    4. Saraceno, Francesco., 2015. "Challenges for the ECB in times of deflation," ILO Working Papers 994881293402676, International Labour Organization.
    5. repec:ilo:ilowps:488129 is not listed on IDEAS
    6. repec:spo:wpmain:info:hdl:2441/60msq70is4953b2qsr30bh7c11 is not listed on IDEAS
    7. Blot, Christophe & Creel, Jérôme & Hubert, Paul & Labondance, Fabien & Saraceno, Francesco, 2015. "Assessing the link between price and financial stability," Journal of Financial Stability, Elsevier, vol. 16(C), pages 71-88.
    8. Francesco Saraceno, 2017. "Rethinking fiscal policy : lessons from the european monetary union," SciencePo Working papers Main hal-03457591, HAL.
    9. Francesco Saraceno, 2017. "Rethinking fiscal policy : lessons from the european monetary union," Working Papers hal-03457591, HAL.
    10. Käfer Benjamin, 2014. "The Taylor Rule and Financial Stability – A Literature Review with Application for the Eurozone," Review of Economics, De Gruyter, vol. 65(2), pages 159-192, August.
    11. Francesco Saraceno, 2017. "When Keynes Goes to Brussels: A New Fiscal Rule for the EMU?," Annals of the Fondazione Luigi Einaudi. An Interdisciplinary Journal of Economics, History and Political Science, Fondazione Luigi Einaudi, Torino (Italy), vol. 51(2), pages 131-157, December.
    12. repec:hal:spmain:info:hdl:2441/114p6m6s0395gqm0es4g7kgv3u is not listed on IDEAS
    13. repec:spo:wpmain:info:hdl:2441/eul7jlnf19iq8tdp0vlfv63n5 is not listed on IDEAS
    14. Aleksandra Halka, 2015. "Lessons from the crisis.Did central banks do their homework?," NBP Working Papers 224, Narodowy Bank Polski.
    15. repec:hal:spmain:info:hdl:2441/eul7jlnf19iq8tdp0vlfv63n5 is not listed on IDEAS
    16. Azar HASANLI, 2016. "A New Era of Monetary Policymaking in the Light of the Post-Crisis Challenges," Turkish Economic Review, KSP Journals, vol. 3(3), pages 473-494, September.
    17. repec:spo:wpmain:info:hdl:2441/114p6m6s0395gqm0es4g7kgv3u is not listed on IDEAS
    18. repec:hal:spmain:info:hdl:2441/19jos6046o8m6qe8fce98t1bmp is not listed on IDEAS
    19. Helmut Wagner, 2010. "The causes of the recent financial crisis and the role of central banks in avoiding the next one," International Economics and Economic Policy, Springer, vol. 7(1), pages 63-82, May.
    20. repec:spo:wpmain:info:hdl:2441/19jos6046o8m6qe8fce98t1bmp is not listed on IDEAS
    21. Stijn Claessens & M. Ayhan Kose, 2013. "Financial Crises: Explanations, Types and Implications," CAMA Working Papers 2013-06, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    22. Piotr Ciżkowicz & Andrzej Rzońca & Andrzej Torój, 2019. "In Search of an Appropriate Lower Bound. The Zero Lower Bound vs. the Positive Lower Bound under Discretion and Commitment," German Economic Review, Verein für Socialpolitik, vol. 20(4), pages 1028-1053, November.
    23. Christophe Blot & Paul Hubert & Fabien Labondance, 2017. "Does monetary policy generate asset price bubbles ?," Documents de Travail de l'OFCE 2017-05, Observatoire Francais des Conjonctures Economiques (OFCE).
    24. Jean-Paul Fitoussi & Francesco Saraceno, 2013. "European economic governance: the Berlin–Washington Consensus," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 37(3), pages 479-496.
    25. Tamim Bayoumi & Giovanni Dell'Ariccia & Karl F Habermeier & Tommaso Mancini Griffoli & Fabian Valencia, 2014. "Monetary Policy in the New Normal," IMF Staff Discussion Notes 14/3, International Monetary Fund.
    26. Hyun Song Shin, 2014. "Adapting Macroprudential Policies to Global Liquidity Conditions," Central Banking, Analysis, and Economic Policies Book Series, in: Miguel Fuentes D. & Claudio E. Raddatz & Carmen M. Reinhart (ed.),Capital Mobility and Monetary Policy, edition 1, volume 18, chapter 2, pages 25-67, Central Bank of Chile.
    27. repec:spo:wpecon:info:hdl:2441/53r60a8s3kup1vc9k2c8h4u2h is not listed on IDEAS
    28. repec:spo:wpmain:info:hdl:2441/74362fq3f99s299n07e84dlcib is not listed on IDEAS
    29. Tabak, Benjamin M. & Fazio, Dimas M. & de O. Paiva, Karine C. & Cajueiro, Daniel O., 2016. "Financial stability and bank supervision," Finance Research Letters, Elsevier, vol. 18(C), pages 322-327.
    30. Christophe Blot & Paul Hubert & Fabien Labondance, 2018. "Monetray policy and asset price bubbles," Working Papers hal-03471562, HAL.
    31. Froyen, Richard T. & Guender, Alfred V., 2018. "The real exchange rate in Taylor rules: A Re-Assessment," Economic Modelling, Elsevier, vol. 73(C), pages 140-151.

    More about this item

    Keywords

    Employment policy; Economic recession; Low income; Financial market;
    All these keywords.

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:spmain:hal-03470271. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Contact - Sciences Po Departement of Economics (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.