Citation

Discussion Paper Details

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Title: The German Federal Constitutional Court Ruling and the European Central Bank's Strategy

Author(s): Lars P Feld and Volker Wieland

Publication Date: September 2020

Keyword(s): central bank independence, Monetary institutions, monetary law, Monetary policy strategy, Policy Rules, Proportionality and Quantitative easing

Programme Area(s): Monetary Economics and Fluctuations

Abstract: The ruling of the German Federal Constitutional Court and its call for conducting and communicating proportionality assessments regarding monetary policy have been the subject of some controversy. However, it can also be understood as a way to strengthen the de-facto independence of the European Central Bank. This paper shows how a regular proportionality check could be integrated in the ECB's strategy that is currently undergoing a systematic review. In particular, it proposes to include quantitative benchmarks for policy rates and the central bank balance sheet. Deviations from such benchmarks can have benefits in terms of the intended path for inflation while involving costs in terms of risks and side effects that need to be balanced. Practical applications to the euro area are provided.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=15320

Bibliographic Reference

Feld, L and Wieland, V. 2020. 'The German Federal Constitutional Court Ruling and the European Central Bank's Strategy'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=15320