Sunday, March 31, 2013

Merijn Knibbe — The three mandates of the European Central Bank: the price level, employment and stability

Summary. According to the European treaties the ECB does have an employment mandate next to its inflation mandate. Looking at more prices than just consumer prices as well as at a historical output gap shows that there is ample scope and necessity for more aggressive monetary policies by the ECB.I received some comments on my post about Jeroen Dijsselbloem, also by email, to which I will answer in a couple of blogposts. The first of these will be about the mandates (plural) of the European Central Bank, the other(s) will be about recent developments.The ‘single’ price stability mandate is, at the moment, invoked again and again as an excuse for bad monetary policies. This is remarkable, as according to the treaties the ECB does not have a single mandate at all. It has, de jure, a clear double mandate. De facto it even has a triple mandate. Let’s first look at what ‘The consolidated version of the Treaty on the functioning of the European Union‘ has to say (article 127, part 1 and 2, emphasis added)):
Real-World Economics Review Blog

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