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The exceptional circumstances in which the ECB has been operating in the past years are testing not only the currency union itself, but also its institutional design. While the Governing Council of the ECB was designed to mainly set interest rates optimally for the union as a whole, the recent crisis has expanded the tools of the ECB to include unconventional monetary policy actions that potentially increase the risk exposure of its balance sheet. Since each country would contribute to the losses according to its capital key, a different voting mechanism that takes into account the single country’s contribution to the ECB’s capital could be advisable.
This paper investigates the role of monetary policy in the collapse in the long-term real interest rates in the decade before the onset of the financial crisis using a sample of five advanced economies (United States, United Kingdom, the euro area, Sweden and Canada). The results from an estimated panel VAR with monthly data show that, while monetary policy shocks had negligible effects on long-term real interest rates, shocks to the long-term real interest rates had a one-to-one effect on the short nominal rate.
The latest appointment to the ECB's Executive Board initiated a political dispute between the European Parliament and the Euro Group on the question of representation of females on the Executive Board and the Governing Council of the ECB. The dispute has raised awareness to the fact that a culture of equality and equal opportunity should be built from the ground up. A long term plan helping talented women to emerge and be prepared to take increasing responsibilities is necessary to make sure that there is a growing pool of qualified female candidates.
The idea of appointing a non-national as Central Bank Governor remains surprisingly controversial. Nevertheless, given the skills required by the Governor in order to manage what no doubt are increasingly complex institutions, considering non-nationals makes good sense for at least two reasons. First, increasing the pool of candidates to include those with broader skills and backgrounds makes it easier to find a suitable person for the job. Second, non-nationals are less likely to be beholden to domestic pressure groups and could help better insulate the central bank from political pressures.