Benoît Coeuré and Hans-Helmut Kotz (eds)
Revue d’économie financière-REF (Financial Economics Review) No. 144, 2022
The latest issue of the REF answers the main questions raised by the current revision of the European Central Bank’s monetary policy. It brings together the governors of several central banks and recognized monetary experts. It combines both theoretical and practical approaches to the issues raised by the revision of the ECB’s strategy. It is currently the best French-language source for reflection on the contemporary monetary economy.
In the introduction, Benoît Coeuré and Hans-Helmut Kotz draw lessons from the financial crises that have occurred since 2008. They note that central banks have been able to adapt their strategies to changes in their economic and financial environments through the coordinated use of conventional and unconventional instruments. Central banks have been true to their mandates, focusing on the fight against inflation and supporting economic growth through an “inexorable decline in interest rates.” They note that the current economic situation requires the implementation of a new monetary policy. How can we redirect savings towards consumption and investment, initiate disinflation, combine the monetary and fiscal policies of States, support energy and climate transitions, and regulate crypto-assets?
In the first part, the authors compare the monetary doctrines applied by the ECB (P-R. Lane) and the FED (R-H Clarida) respectively. They question the effectiveness of unconventional measures (low interest rates, forward guidance, purchase of public debt, liquidity support) and explore the possible new approaches of central banks in a more demanding economic environment, marked by a “double shock” of supply and demand (F. Villeroy de Galhau, V. Brignon, and B. Cabrillac). They analyze the changes in strategies (O. Issing) and the possible exceptional measures in order to practice a “flexible targeting of inflation” (O. Schumacher). In the second part, the experts discuss the ways of “budgeting monetary policies”, recalling that central banks are not in principle intended to intervene in the fiscal policies of governments (S-G. Cecchetti, K-E. Schoenholtz), but that in practice, the ECB’s accommodative policies were intended to support the private economy, but have in fact encouraged the fiscal drift of certain states, particularly in southern Europe (A. Orphanides). In a third part, the authors analyze the new challenges that central banks must face in order to promote energy and climate transitions, as well as to deal with the development of cryptocurrencies. M. Derer, D. Dohrmann and J. Gerik question the role of the ECB in hedging the financial risks generated by climate change, while M. Thiemann assesses the impacts of monetary policies on the management of the Covid crisis. M. Aglietta and N. Valla trace the history of digital currencies and identify the roles of central banks in their regulation and in the creation of central bank digital currencies (CBDCs). Finally, L. Scialom measures the societal responsibility of central banks in crisis management, while P. Berès shows that since Mario Draghi’s “whatever it takes” in 2012, central banks have replaced welfare states.
Note by J-J. Pluchart
