Improving the ECB's policy strategy

Athanasios Orphanides

No 220, IMFS Working Paper Series from Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS)

Abstract: The ECB can fulfil its mandate better and contribute to a stronger Europe by adopting sensible rules instead of relying on discretionary decision-making. A simple rule for the policy rate can promote systematic monetary policy and protect against significant policy errors. Ending the reliance on credit rating agencies for determining the collateral eligibility of government debt can improve the functioning of government bond markets and lower financing costs for governments. With sensible rules, the ECB can secure price stability and avoid unwarranted fragility in government bond markets. Alleviating fiscal stress can free fiscal resources for public investment aimed at boosting productivity, greening the economy and strengthening European defense. Within its mandate, the ECB can serve Europe better than in the past.

Keywords: ECB; policy rules; forward guidance; fiscal stress; collateral framework (search for similar items in EconPapers)
JEL-codes: E52 E58 E61 H63 (search for similar items in EconPapers)
Date: 2025
New Economics Papers: this item is included in nep-cba and nep-eec
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:imfswp:319651

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