Edited by Miriam L. Campanella and Sylvester Eijffinger
Chapter 7: Euro weakness and the ECB economic governance: a strategic institutionalist perspective
Miriam L. Campanella INTRODUCTION In transaction cost economics (Williamson, 1975; Ouchi, 1980; Perrow, 1981), economic governance is intended to be a remedial tool for market failures. Either when carried out by state-led institutions or when assigned to independent central agencies, mechanisms of economic governance are meant to restore the terms of market competition and (or) regulate the structure of property rights (North, 1981). European economic integration has given rise to a unique example of evolutionary economic governance generated by supranational institutions designed to deliver and monitor regulatory legislation in sensitive sectors of common interest, ranging from safety standards to market competition, which have normally been the exclusive province of national states. This chapter argues that the ECB, a major EU-level institution designed to take charge of the Euro area monetary policy, has managed its monetary policy beyond the limit maintenance of price stability,1 a major objective of its statutory assignments, keeping the Euro area interest rate policy in tune with macroeconomic responsibility. Whether this attitude developed from the objective rigidities of the European economy and the strictures of its ﬁscal policy, as some authors have argued (Begg et al., 2002), or from the idiosyncrasy of the monetary area, which made it hard to pursue an inﬂation rate of less than 2 per cent, it is a matter of fact that the inﬂation reference value which the bank set as a self-deﬁned target was not achieved. Further, the constant weakness of the Euro on exchange foreign markets...
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