Culture Matters: French-German Conflicts on European Central Bank Independence

Femke van Esch () and Eelke de Jong ()

No 11-23, Working Papers from Utrecht School of Economics

Abstract: With the Maastricht treaty, the members of the Eurozone agreed on the establishment of a very independent European Central Bank, as well as making their National Central Banks far more independent. However, over the years French political leaders systematically brought forward proposals undermining the ECB's independence, to the dismay of Germany. A pattern that surfaced again during the current sovereign debt crisis and has complicated finding a timely and unified answer to the problems. The article conducts tests of various factors expected to influence the preference for central bank independence. It shows that economic explanations are unable to account for the persistent differences amongst European member-states on this issue. Instead, cultural differences in attitudes, especially a nation's score on the dimension of Power Distance - its acceptance of centralisation of power in a small set of political leaders or institutions - does show a correlation with the different levels of internalisation of the Central Bank independence norm.

Keywords: Central Bank Independence; Culture; European Central Bank; Franco- German relations (search for similar items in EconPapers)
JEL-codes: E58 E52 F36 B52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba and nep-eec
Date: 2011-11
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