The ECB's separation principle: does it 'rule OK'? From policy rule to stop-and-go

Christian Bordes and Laurent Clerc

Oxford Economic Papers, 2013, vol. 65, issue suppl_1, i66-i91

Abstract: Prior to and during the first stage of the crisis, the ECB's conduct of monetary policy was consistent with the 'separation principle', which refers to the division between monetary and liquidity management policies. However, it became increasingly difficult to apply as interest rates approached their lower-bound. While it was supposed to guide the ECB's exit strategy, the ECB finally resorted to a 'stop-and-go policy'. The separation principle strongly depends upon the institutional setup in which the central bank operates. We show that the difficulties faced by the ECB are due to an important feature of the monetary union, which economic governance is essentially rule-based. The success of a monetary union crucially depends on the strict compliance to the rules. The breach of the rules forced the ECB to stabilize euro area sovereign debt markets, stretching its mandate and altering the efficacy of the separation principle. Copyright 2013 Oxford University Press 2012 All rights reserved, Oxford University Press.

Date: 2013
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://hdl.handle.net/10.1093/oep/gps049 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: The ECB's separation principle: does it "rule OK"? From policy rule to stop-and-go (2013)
Working Paper: The ECB's separation principle: does it "rule OK"? From policy rule to stop-and-go (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:oxecpp:v:65:y:2013:i:suppl_1:p:i66-i91

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

Oxford Economic Papers is currently edited by James Forder and Francis J. Teal

More articles in Oxford Economic Papers from Oxford University Press Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK.
Bibliographic data for series maintained by Oxford University Press ().