Title

Gaps in the Institutional Structure of the Euro Area

Author(s)

Christopher A. Sims Christopher Sims (Princeton University)

Abstract

The Euro was created at a time when the conventional view was that a central bank could control inflation by controlling the money supply and that fiscal policy?s interaction with monetary policy took the form of attempts to get the central bank to finance government debt. With a sufficiently firm and independent central bank, this view considered that financial markets would force discipline on fiscal policy. By creating a strong, independent central bank at the European level, facing multiple country-level fiscal authorities, the threat of political pressures for inflationary finance would be lower than with individual country central banks.

Creation Date

2013-05

Section URL ID

CEPS

Paper Number

233

URL

https://gceps.princeton.edu/wp-content/uploads/2017/01/233sims.pdf

File Function

Jel

E020, E210, F330, F340, G210

Keyword(s)

central banking, European union, monetary policy

Suppress

false

Series

3