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Chapter 14: Q 2. (page 387)

Go to https://www.ecb.europa.eu/ecb/orga/escb/ html/index.en.html. Click on 鈥淥rganization鈥� and choose 鈥淚ndependence.鈥� What is the main argument used to defend the ECB鈥檚 political independence?

Short Answer

Expert verified

The main argument used to Support ECB鈥檚 political independence is that it is important to maintain price stability.

Step by step solution

01

Step 1. Introduction

European Central Bank is considered to be the central bank for the eurozone which is a group of countries exactly to be 19 countries that have a common currency that is Euro.

02

Step 2. Explanation 

European Central Bank or ECB enjoys a significant degree of political independence. ECB, NCBs, or its members are not required to take instructions from governments of EU members, institutions, or other bodies. On the other hand, these institutions, bodies, and member governments are expected to follow this principle.

It has been mentioned that both empirical evidence, as well as theoretical analysis, support the argument the political independence of the European Central Bank is important to maintain price stability.

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Most popular questions from this chapter

Why might eliminating the central bank鈥檚 independence lead to a more pronounced political business cycle?

William does not feel comfortable with the current level of the European Central Bank鈥檚 independence. Put yourself in William鈥檚 shoes and state an argument against the current level of the European Central Bank鈥檚 independence.

How would you argue in favor of the current trend toward central banks鈥� independence?

The independence of the central bank has meant that it takes the long view and not the short view.鈥� Is this statement true, false, or uncertain? Explain your answer.

In what ways can the national central banks influence the conduct of monetary policy?
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