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The German Federal Constitutional Court ruling and the European Central Bank's strategy

Lars Feld () and Volker Wieland ()

No 145, IMFS Working Paper Series from Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS)

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. The authors shows how a regular proportionality check could be integrated in the ECB's strategy that is currently undergoing a systematic review. In particular, they propose 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

Keywords: central bank independence; monetary law; monetary institutions; monetary policy strategy; proportionality; policy rules; quantitative easing (search for similar items in EconPapers)
JEL-codes: E52 E58 K10 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-cba, nep-eec, nep-law, nep-mac and nep-mon
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Working Paper: The German Federal Constitutional Court Ruling and the European Central Bank's Strategy (2020) Downloads
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