DIRECTORATE GENERAL FOR INTERNAL POLICIES
POLICY DEPARTMENT A: ECONOMIC AND SCIENTIFIC POLICY
Central Bank Accountability in Times of Crisis.
The Monetary Dialogue: 2009-2014
NOTE
draft
Abstract
The Monetary Dialogue between the European Parliament and the ECB is a major
factor in assuring the legitimacy of European institutions. This note provides new
evidence in the efficiency of the Dialogue for the crisis management and presents
the results of a survey conducted among the members of the ECON Committee.
IP/A/ECON/NT/
Part of the compilation PE
EN
This document was requested by the European Parliament's Committee on Economic and
Monetary Affairs.
AUTHOR
Stefan COLLIGNON, Scuola Superiore Sant'Anna, Pisa and London School of Economics
Research assistance by Sebastian DIESSNER, London School of Economics and Piero
Esposito, Centro Europa Richeche, Rome
RESPONSIBLE ADMINISTRATOR
Dario PATERNOSTER
Policy Department Economic and Scientific Policies
European Parliament
B-1047 Brussels
E-mail: Poldep-Economy-Science@europarl.europa.eu
LINGUISTIC VERSIONS
Original: EN
ABOUT THE EDITOR
To contact the Policy Department or to subscribe to its newsletter please write to:
Poldep-Economy-Science@europarl.europa.eu
Manuscript completed February 2014
Brussels, © European Union, 2014.
This document is available on the Internet at:
http://www.europarl.europa.eu/activities/committees/studies.do?language=EN
DISCLAIMER
The opinions expressed in this document are the sole responsibility of the author and do
not necessarily represent the official position of the European Parliament.
Reproduction and translation for non-commercial purposes are authorised, provided the
source is acknowledged and the publisher is given prior notice and sent a copy.
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CONTENTS
EXECUTIVE SUMMARY
4
1.
INTRODUCTION
5
2.
THE IMPORTANCE OF ACCOUNTABILITY AND COMMUNICATION IN CENTRAL
BANKING
8
3.
4.
2.1
Accountability and the paradigm of central bank independence
8
2.2
The challenges for monetary policy during and after the crisis
9
2.3
Parliamentary scrutiny of central banks
11
THE IMPACT OF THE MONETARY DIALOGUE
12
3.1
Style and content of the dialogue
13
3.2
Econometric evidence
16
3.3
How MEPs see the Monetary Dialogue
17
CONCLUSION
21
REFERENCES
22
ANNEX 1. ECONOMETRIC EVIDENCE FOR THE IMPACT OF THE MONETARY
DIALOGUE ON BOND MARKETS
23
ANNEX 2. FREQUENCY OF QUESTIONS INDIVIDUAL MEPS HAVE ASKED
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EXECUTIVE SUMMARY
The time of the European Parliament's 7th legislative term (2009-2014) was
overshadowed by the severe global and European financial crises. This has
transformed the conduct and environment for monetary policy. While the ECB is
independent and member states are autonomous, the Monetary Dialogue (MD) is
one of the few bridges to link monetary policy with other policy considerations and it
contributes importantly to the legitimacy of the ECB.
The European Central Bank is one of the most independent central banks in the
world and it has, therefore, a particular responsibility for ensuring transparency and
accountability in the conduct of its policies. The note reviews the theoretical
arguments for parliamentary accountability, as well as earlier studies of the
Monetary Dialogue.
In the public debate about monetary policy, the European Parliament was hardly as
audible as it deserves. While the Monetary Dialogue has often served to clarify the
policy stances of the ECB, the Parliament has never taken a well-defined policy
stance for Europe or developed a debate about clear-cut policy alternatives.
Although questions posed by MEPs are often pertinent, they remain enmeshed in the
day-to-day management of the political machine of which the agenda is set by the
Council and the Commission. As a consequence, the Monetary Dialogue has served
primarily as one of several communication instruments for the ECB.
One of the major failures during the legislature was the fact that the European
Parliament has not questioned the major policy blunder when the ECB raised
interest rates prematurely in 2011. However, the quality of exchanges has
significantly improved since Mario Draghi became President of the ECB.
Econometric evidence does not show a stabilizing effect from the Monetary Dialogue
during the Euro crisis. With the exception of Italy, yield spreads amplified in all crisis
countries in the days after the Monetary Dialogue (or fell less if the general
tendency was to reduce them). Volatility increased slightly in Spain and very
marginally in Italy. However in Greece, market volatility falls while spreads increase,
which means markets are more certain about the risks for Greece as a consequence
of the information obtained from the Dialogue.
The note also reports the opinions of MEPs about the dialogue. Less than two thirds
of the members of the ECON Committee have asked questions to the ECB President.
In general, the frequency of interventions by MEPs represents the strength of their
parliamentary group in the Parliament overall, although ALDE outperforms other
groups and S&D underperform. Crisis countries have more than average questions
and non-Euro members have also participated actively.
Most MEPs are aware that the Monetary Dialogue did not improve the crisis
management during the crisis, but they consider it useful for themselves and for the
citizens they represent. In general, pro-European parties on the centre-right have a
good opinion about the Monetary Dialogue, left of centre and anti-European MEPs
are more critical.
MEPs feel well prepared for the exchanges with the ECB, but they feel less informed
how parliamentary control is done in other major economies.
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1.
INTRODUCTION
As the European Parliament's 7th legislative term is coming to an end, it is time for stock
taking. The time of this Parliament (2009-2014) was overshadowed by the severe global
and European financial crises. Financial markets were in uproar. Interest rates were cut to
the lower bound close to zero and stimulating the economy in the middle of a liquidity trap
became a new task. In all major economies of the world, traditional monetary policy had to
be supplemented by unconventional approaches. The global crisis was doubled by the Euro
crisis, which nearly brought the European currency and even the European integration
project close to the point of implosion.
In this context, parliamentary oversight of monetary policy was certainly more justified
than ever. In the end the collapse has been avoided and all the evidence points to the
European Central Bank (ECB) as the principal actor for salvaging the euro, while member
state governments have often amplified the crisis.
According to standard economic theory, monetary and fiscal policy ought to be coordinated
in a crisis of this dimension, but the Euro Area‟s institutional architecture was more an
obstacle than help for such coordination. Member states and the Council remain in charge
of economic and fiscal policies, despite extensive external effects on all citizens in the
currency union. Greece is the paradigmatic case that has shown how much damage for all
European citizens can be done by uncooperative national policies, but the logic applies to all
other member states, regardless of whether they are small or large.
The European Parliament has played an ambivalent role in this process. It has been a
strong ally for the ECB in holding the Euro Area together, but many of its reports and
proposed remedies in the crisis had little or no impact on member state policies; when it
had legislative competences, the Parliament has been able to foster and deepen
cooperation, but often it has simply condoned and only marginally modified policies that
were proposed by powerful member states and promoted by the European Commission.
The Committee on Economic and Monetary Affairs has played a particular part in this
context, because it is the only forum in the institutional architecture that can hold the ECB
accountable. Of course, its responsibilities are much broader than this, but as economic
theory has taught for decades, the interaction between monetary, fiscal and other
economic policies is crucial for overcoming the crisis. While the ECB is independent and
member states are autonomous, although fiscal policy is constrained by an ever closer net
of rules, the Monetary Dialogue (MD) is one of the few bridges to link monetary policy with
other policy considerations.
The European Parliament‟s role for holding the ECB to account is based on article 284(3) of
the Treaty on the Functioning of the European Union, which states: “The European Central
Bank shall address an annual report on the activities of the ESCB and on the monetary
policy of both the previous and current year to the European Parliament, the Council and
the Commission, and also to the European Council. The President of the European Central
Bank shall present this report to the Council and to the European Parliament, which may
hold a general debate on that basis. The President of the European Central Bank and the
other members of the Executive Board may, at the request of the European Parliament or
on their own initiative, be heard by the competent committees of the European
Parliament.” The Protocol (No 4) on the Statute of the European System of Central Banks
and of the European Central Bank reasserts this function. Formally the Monetary Dialogue
was set up by the European Parliament‟s Resolution on “democratic accountability in the
third phase of EMU of 4 May 1998” which called for the organisation of a dialogue between
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the European Parliament and the future ECB on monetary and economic affairs, the
framework for which dialogue should be confirmed through a mutual agreement.1
Although the Treaty requires only one meeting a year, the Monetary Dialogue takes place
quarterly in the form of a meeting between the Committee on Economic and Monetary
Affairs (ECON) and the President of the ECB. This frequency exceeds the average
appearances by other central banks before their parliaments (Eijfinger and Mujagic 2004).
Prior to the meetings of the Dialogue, two subjects are usually identified for discussion and
an expert panel is requested to submit notes as background information. During the formal
session, the President is first asked to give a short introductory statement and then he
replies to the questions from MEPs which do not necessarily stick to the previously
identified subjects. Over the years, the time allowed for the initial statement has been
shortened in order to give MEPs the opportunity to ask more questions.
Evaluating the impact of the Monetary Dialogue is difficult, because the consequences of a
discussion are diffuse and because the ECB is formally independent and does not take any
instructions from European or national institutions. Earlier assessments of the Monetary
Dialogue have often been critical.2 Academics have observed lack of forcefulness and
insufficient qualification of MEPs; a tendency to talk cross-purpose; the absence of common
grounds or concerns between ECB and EP, reinforced by the large size of the ECON;
questions have covered less often monetary and more frequently fiscal policy; and on most
issues the ECB holds the discursive monopoly. Nevertheless, in their study of previous
parliaments, Eijfinger and Mujagic (2004) have observed that in 71% of the cases the ECB
had implemented changes requested by the ECON. Moreover, they claimed that the
transmission from the panel of economic experts to ECON was equal to 100 %. No wonder
some of their policy recommendations read as if the experts were driving the Monetary
Dialogue. Siebert (2005) also finds some evidence that the Economic and Monetary
Committee was more successful in influencing monetary policy when it was in line with the
expert panel advising it.
Nevertheless, I believe that the experts (including myself!), who are asked to evaluate the
Monetary Dialogue, have a tendency to take themselves far too seriously. Economic
theories usually have a fairly short life-cycle (10-15 years) and most academic economists
run with the herd because that is required to get published. However, as de Grauwe and
Gros (2009) nicely demonstrate, following the mainstream is no guarantee that a theory is
true. They present a model in which the exclusive focus on price stability and the neglect of
financial stability may have been a cause (!) for mistaken monetary policies leading to the
financial crisis. My point is not to say all experts got it wrong, but to insist that plurality in
expert opinions, challenges of mainstream views, and questioning orthodoxies must be an
important part of the process by which the ECB is held to account, especially in a society as
diversified as the Euro Area‟s. This diversity is, of course, deeply reflected in the European
Parliament, and in fact more so here than in any other European institution. It is precisely
for this reason that the Monetary Dialogue is important. The need to respond to all the
concerns of citizens will anchor the ECB firmly in society, generate a public sphere and
increase the acceptability and legitimacy of European institutions.
In the rest of this note, I will quickly review theories why central bank accountability is
important, especially during the crisis, and then look at the impact the Monetary Dialogue
1
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:51998IP0110:EN:HTML
See: De Grauwe and Gros, 2009; Amtenbrink and Van Duin, 2009; Wyplosz, 2005;
Siebert, 2005; Eijfinger and Mujagic 2004; Gros, 2004.
2
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has had during the 7th Parliament in terms of the quality of the exchanges, econometric
evidence and the views MEPs have themselves about the usefulness of the dialogue.
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2.
THE IMPORTANCE OF ACCOUNTABILITY
COMMUNICATION IN CENTRAL BANKING
2.1
Accountability
independence
and
the
paradigm
of
central
AND
bank
The European Central Bank is one of the most independent central banks in the world and
it has, therefore, a particular responsibility for ensuring transparency and accountability in
the conduct of its policies. Noblesse oblige. Because money is the economy‟s hard budget
constraint, central bank independence is often criticized for imposing constraints on the
sovereignty of states and therefore called undemocratic.3 In principle this argument applies
to an independent national central bank as much as to a transnational central bank such as
the ECB: if the central bank can refuse to monetize public debt in order to maintain low
inflation, the sovereignty of governments is no longer absolute. However, this concept of
state sovereignty is pre-democratic. It has overshadowed political conflicts in the 17th and
18th century, but with the Glorious Revolution in England (1688), with the American
Revolution (1876) and Constitution (1787), and with the French Revolution (1789), the
idea that states are sovereign has been replaced by the democratic principle that people,
i.e. the ensemble of all citizens, are the sovereign who authorizes the laws that are applied
to citizens themselves. Since then systems of checks and balances have become the widely
accepted institutional guarantee that any form of political power remains subordinate to the
authority and sovereignty of citizens.
The euro and the European Central Bank have been created by law, i.e. by the Treaty on
European Union and national monetary laws, and the ECB takes decisions that apply to all
citizens living in the Euro Area, with external effects on the European Union as a whole.
There is therefore a need for checking the power of the central bank and doing this is the
purpose of parliamentary surveillance and the Monetary Dialogue. Yet, a central bank has
by definition only a limited technical task as the bank of banks which alone supplies the
legal tender currency. The ECB has a clear political mandate for preserving price stability as
the first priority and for contributing to financial stability, as well as supporting other
economic policies provided price stability is achieved. In order to fulfil this function
efficiently, interferences from other institutions ought to be minimized and this is best
achieved by making the central bank independent, i.e. not subject to any orders or
directives. Nevertheless, as in all instances of delegated tasks, there is always a question
whether an agent, in this case the central bank, makes enough efforts to achieve the
mandated purposes. It is, therefore, one of the noblest tasks of the European Parliament to
hold the European Central Bank to account and check if and how it fulfils its mandate.
The concept of central bank independence has gained prominence in the 1970s and 1980s.
After the System of Bretton Woods had collapsed, money was no longer directly or
indirectly pegged to gold; it had become pure fiat money, which is based on the trust and
confidence of economic agents. Quickly it became clear that without a credible anchor,
unconstrained money supply would only generate inflation, thereby undermining the
3
For example Baimbridge et al. (1999) wrote: „The ECB's problems arise from its lack of
democratic accountability, its arbitrary objectives, its outdated economic philosophy, and
its potential for intermittent conflict with the national governments whose destinies it
possesses considerable influence over. Therefore the ECB as currently constituted is an
anti-democratic, economically inept institution. Its lack of accountability, transparency
and democratic legitimacy makes clear that no British government concerned for the
efficiency of the UK economy and capacity for self-governance could submit to the ECB's
monetary authority.” Although this statement is 15 years old, and I believe it is factually
wrong, it may have more supporters today than ever.
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functionality of a monetary economy. In the 1980s it also became increasingly evident that
an independent central bank like the German Bundesbank was likely to preserve price
stability better than central banks under political control, so that the necessary stabilisation
policies had less negative social consequences for employment. 4 Economists developed the
theory of institutions as commitment devices and rules that prevent time inconsistency in
discretionary policy making (Kydland and Prescott, 1977). Monitoring that the
commitments are met was seen as crucial for maintaining the trust in the system. It was
argued that when monetary policy had only one primary objective, namely maintaining
price stability, the rule was simple and could be monitored easily. Other objectives were
subordinated to attaining and keeping low inflation. Economic growth was thought to be
determined in the long run by structural factors in the “real”, i.e. non-monetary economy
and maintaining stable value of money would allow markets to expand and improve
employment and welfare. In countries like the United States, where the Fed was given the
mandate to pursue two symmetrical objectives, employment and price stability, monetary
policy sought to minimise the deviation from the inflation objective and potential long run
growth of output (which was again determined by structural factors). This philosophy was
expressed in the well-known Taylor Rule and inflation targeting became the widely
accepted framework for the conduct of monetary policy, even when central banks focussed
primarily on price stability.
The existence of the monetary pillar in the ECB‟s operating framework indicates that it is
not a pure inflation targeter. However, all important central banks in the world, including
the ECB, have accepted that justifying and explaining their policies to a democratically
elected body and communicating carefully to markets and the broader public was a
necessary condition for the effectiveness of their actions, because the transmission of
interest rate changes to the real economy was largely dependent on expectations among
economic agents.
2.2
The challenges for monetary policy during and after the
crisis
With the Financial Crisis in 2007-9 the foundations of this dominant economic theory have
been shaken. While the debate about policy objectives used to focus on the short term
trade-off between inflation and unemployment, it has now become obvious that
conventional monetary policy must be grounded in financial stability. Focussing on medium
term price stability supported by central bank independence, accountability and clear
communications was by itself not enough to guarantee financial stability (Vayid, 2013). The
source of the financial instability caused by the global financial crisis was the build-up of
asset price misalignments (bubbles), which had led to asset overvaluations and persistent
debt accumulation. In principle, the ECB could have prevented credit bubbles by controlling
monetary and credit aggregates in the monetary pillar of its strategy framework. In reality,
it is extremely difficult to detect the early stages of a bubble and in the Euro Area asset
bubbles were localised in some member states. The ECB has therefore, like all other central
banks, given priority to inflation targeting of consumer prices, which excludes asset prices.
Nevertheless, one may ask why the Committee on Economic and Monetary Affairs has not
pushed the ECB harder to explain the development of asset prices before the crisis. During
the 7th Parliament, the Committee did raise the issue during almost every session, but the
ECB‟s answers have remained evasive and were rarely linked to the monetary pillar.
4
The most prominent economic theory behind this claim is the Barro-Gorden Model, which
is now taught in most universities and text books around the world. See De Grauwe
(2012) for the application to EMU.
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The crisis has generated new challenges for monetary policy. First of all, how should the
ECB deal with financial instability? The Euro Area was slow to seize the full policy
implications from the crisis. The European Commission, under pressure from important
member states, persisted with old-fashioned structural policies and imposed austerity as a
response to the debt crisis, while financial markets were heading to a meltdown with
massive fire sales re-enforcing the dynamics of financial instability. The disaster was only
avoided when the ECB explicitly acknowledged that maintaining financial stability was one
of its objectives and President Draghi declared that the ECB would “do whatever it takes to
preserve the Euro”. In practical terms, the ECB reacted by unconventional policies, namely
by providing ample liquidity through the 3-year LTROs, by open market purchases under
the SMP, and finally by setting up the Outright Market Transaction (OMT).
Secondly, the crisis has posed questions for the future conduct of monetary policy. Should
the ECB address financial imbalances and asset price misalignments pre-emptively (lean
against the wind) or rather clean up after they unwind?5 As Europe is painfully learning
now, a lesson Japan had learned already earlier, unwinding imbalances involves extensive
and lengthy debt deleveraging, which is associated with persistently weak demand, low
growth, rising unemployment and fiscal constraints (Vayid, 2013: 21).
The implications of these developments are still under debate. How should the objective of
financial stability be integrated into monetary policy? In the Euro Area, discussions focus at
the moment on the creation of a Banking Union and macro-prudential supervision. These
issues will have far-reaching consequences in the future for the conduct of monetary policy
in general and for the communication and accountability of monetary policy in particular.6
The European Parliament has not been absent to these discussions, but among all the other
voices commenting on monetary policy it was hardly as audible as it deserves. While the
Monetary Dialogue has often served to clarify the policy stances of the ECB, the Parliament
has rarely taken a well-defined policy stance for Europe or developed a debate about clearcut policy alternatives. Although questions posed by MEPs are often pertinent, they remain
enmeshed in the day-to-day management of the political machine of which the agenda is
set by the Council and the Commission. As a consequence, the Monetary Dialogue serves
primarily as one of several communication instruments for the ECB. But how efficient is this
tool?
5
6
According to J. C. Trichet, the ECB anticipates: “Our monetary analysis, which
concentrates on the monitoring of money and credit, (…) is a strategic framework that
embeds a degree of implicit „leaning against the wind‟ of excessive money, credit and
asset price growth. Judgement is, of course, necessary in addressing asset price
dynamics. The ECB has developed considerable expertise in the analysis of monetary and
credit developments and their implications for risks to price stability, which has proved
an invaluable asset also throughout the financial crisis.” Monetary Dialogue With Mr JeanClaude
Trichet,
Brussels,
Monday
22
March
2010;
http://www.europarl.europa.eu/committees/en/econ/home.html
Vayid (2013: 1) writes: „Since the global financial crisis, there has been nothing short of a
„revolution‟ in the use of central bank communications as a distinct policy tool under the
unconventional monetary policies. Furthermore, with many central banks now playing a
role in promoting financial stability, questions about the extent of transparency in
communication on financial risks and vulnerabilities have also been the focus of attention
and debate.” However, Carréa et al. (2011) are uncertain whether the paradigm shift is
permanent or temporary.
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2.3
Parliamentary scrutiny of central banks
The academic literature distinguishes between central bank transparency and
accountability. Transparency is the broader concept. It applies to all forms of
communication about the conduct of monetary policy. It includes setting up a coherent
strategic and operating framework, the publication of forecasts, sometimes also the
publication of internal records on the debates in the policy making bodies. In addition to
these structural arrangements, transparency requires the frequent communication to
financial markets and the public at large. The ECB does this through its Monthly Bulletin, its
Annual Report, the Financial Stability Report and published research, including forecasts,
and the frequent speeches by its staff and directors.
Accountability means explaining and justifying policy decisions ex post, i.e. by making clear
why the ECB did what it did and why the measures taken may or may not have achieved
their purpose. However, with unconventional policies, ex ante explanations, or forward
guidance, have become important areas where transparency and accountability overlap.
This generates new demands on the Monetary Dialogue. Accountability for central banks is
always towards democratically elected representatives, either parliaments or governments.
Stasavage (2003) has studied the arrangements in 44 countries and found 32 had a
specific requirement for central bank officials to testify before a national parliament on a
regular basis. However, in some countries there were also provisions for governments to
override central bank decisions. The literature has emphasised that transparency and
accountability might improve the efficiency of monetary policy although it has been argued
as well that if accountability includes the possibility of overriding the central bank, it might
be counterproductive. This is why the ECB has been given both instrument and goal
independence, which means it can determine the quantitative benchmarks for the
realisation of its primary objective as well has the instruments by which it can achieve
them.
How strong is the impact of transparency on the efficiency of monetary policy? Stasavage
(2003) has estimated the relation between transparency, accountability and the cost of
disinflation. He found significant effects for the reduction of these social welfare costs with
respect to forecast transparency, the possibility of governments overriding central banks
and wage coordination. However, most interestingly, reporting to the legislature was
always statistically insignificant and had a positive cost-increasing sign in high income
OECD countries. This result ought to encourage modesty and keep us from exaggerating
the role of the Monetary Dialogue of European Parliament. Transparency might be more
important than accountability in the narrow sense.
However, the European Parliament may also be a driver in making the ECB more
transparent. In the past, it has demanded and obtained the publication of forecasts; more
recently President Mario Draghi has considered the option of publishing the minutes of
discussions in the Governing Council.7 However, in the future – and that will be a major
task for the next Parliament – communicating and clarifying a convincing exit strategy from
unconventional monetary policies without creating further instability in financial markets
will be the greatest challenge.
7
http://www.sueddeutsche.de/wirtschaft/ezb-praesident-draghi-will-geheime-ezbprotokolle-veroeffentlichen-1.1734972
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3.
THE IMPACT OF THE MONETARY DIALOGUE
Has the Monetary Dialogue made a difference during the Euro crisis? Figure 1 shows the
yields on 10-year government bonds for some selected Euro member states. The widening
spread relative to Germany (lowest line) is an indicator for the evolution of the crisis. 8
Interest rate spreads are most dramatic for Greece, but it is clear that Italy and Spain were
also increasingly affected.
The blue vertical lines indicate days at which the Monetary Dialogue took place during the
7th legislative term of the European Parliament. Important monetary policy events have
often occurred between these dates. Thus, the appearance of the ECB President before the
Committee could have been an opportunity to either prepare the MEPs for the next step in
the unfolding drama, or to justify decisions taken after the event.
In this section, I will first make some observations about the style and content of the
exchanges of opinion and then present some econometric evidence for the impact of the
Monetary Dialogue. In the third section I will present the views members of the ECON
Committee have about the Monetary Dialogue.
Figure 1.
OMT announced
Papandreou elected
35
Lehman
40
LTRO
EFSF
10-year Government Bond Yields and Monetary Diaologue
30
25
20
15
10
5
0
2008
2009
2010
2011
2012
2013
Source: ECB and European Parliament
GERMANY_10Y
IRELAND_10Y
SPAIN_10Y
UNION_10Y
8
ITALY_10Y
GREECE_10Y
FRANCE_10Y
The chart also shows the yields for a weighted average, which I have called Union Bonds
in the past. See Collignon, 2011
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3.1
Style and content of the dialogue
th
The 7 Parliament has covered the full unfolding of the Euro crisis. During its term, the
Monetary Dialogue has taken place 20 times. Initially, the ECB was represented by
President Jean-Claude Trichet, after 1 November 2011 by Mario Draghi. Thus, this
Parliament has seen many transformations of monetary policy and its environment and that
would have justified thorough scrutiny.
The style of interactions has changed significantly during the five year period. In the early
days, MEPs asked Mr Trichet questions in a somewhat submissive fashion, to which he
replied in the broadest possible way. Dwyer and Clarida (2012: 38) have argued that this
was a deliberate policy: “The ECB realized that keeping a certain level of opaqueness allows
more flexibility and credibility in non-standard measures, especially since the ECB does not
want to expose itself to speculative attacks”. MEPs seemed to go along with this
philosophy. However, at the later stages of the crisis it became clear that markets needed
clarity and guidance, not opacity. By 2013, the Parliament‟s exchanges with Mr Draghi had
become the expression of an emancipated working relationship, where clearly everyone
was a partner trying to solve the Euro Area‟s problems, even if in different roles.
Some of the subjects under discussion re-appeared in every session: growth, price stability
(in this order), fiscal policy, internal and external competitiveness, financial and macro
prudential supervision. Others clearly gained prominence with the intensification of the
crisis: liquidity provision and yield spreads; institutional innovations (EFSF, ESM, Fiscal
Compact, SMP, LTRO, OMT), even constitutional issues (van Rompuy Report, exit from the
Euro area), and of course austerity. While the discussions with President Trichet covered
broad macroeconomic issues and remained more superficial, the Dialogue with President
Draghi has become more operational and technical. Trichet frequently stopped technical
questions by referring to the ECB‟s mandate; Draghi is willing to answer even hypothetical
questions as this example shows: “I still claim that our LTROs have been quite timely and,
all in all, successful. If the only thing we have achieved is buying time – and it is not the
only thing – that would in itself be an extraordinary success. Think about what could have
happened: EUR 230 billion-plus of bank bonds due in the first three months of this year and
more than that in sovereign funding due, and markets completely closed. We avoided
that.”9
However, if the purpose of the Monetary Dialogue is to hold the ECB to account, there have
been some spectacular mishaps.
On 9 March 200910 (the last session of the previous Parliament), the global financial crisis
had already thrown the world into its deepest recession since World War II,11 but the ECB
President and MEPs still seemed to be in relatively optimistic mood, believing in the Euro
Area‟s resilience after the earlier important interest rate cuts. Nevertheless, Trichet already
pointed at three subjects, which were to dominate the next five years: asset price
dynamics, mainly in the housing market, internal macroeconomic imbalances, and the need
for macro prudential supervision. John Purvis (PPE), who did not return to the next
Parliament, asked the pertinent question whether there was a contingency plan “in case
one of the Member States really got into very substantial difficulties and was unable to fund
its public debt?” Trichet replied; “it is absolutely absurd to imagine that one member
9
10
11
Monetary Dialogue With Mario Draghi, Brussels, Wednesday, 25 April 2012;
http://www.europarl.europa.eu/committees/en/econ/home.html
Monetary Dialogue With Mr Jean-Claude Trichet, Brussels, Monday 30 March 2009;
http://www.europarl.europa.eu/committees/en/econ/home.html
On 22 March 2010, Trichet even ventured to say: “we have had to cope with the worst
crisis since World War II, perhaps even potentially the worst crisis since World War I.”
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country of the eurozone could be in a situation which would create a problem for the
eurozone as a whole.” One year later, he had to admit: “It is true that the simple fact that
a country that only represents 2.5% of the euro area‟s gross domestic product – in other
words a tiny fraction of the euro area – has an influence on the whole of the euro area that
is visible and perceptible to all of our fellow citizens is precisely a way of realising that we
do indeed share a common destiny and that all of us therefore – I am talking of the
governments here – are justified in exercising this common responsibility, this collective
responsibility which is essential.”12 No MEP asked Trichet why he had come to the new
conclusion. Maybe it was too obvious in the changed environment, but the incidence shows
that mistakes in assessment are often shared by the scrutinized as well as by the
scrutiniser.
Another example for insufficient scrutiny is what may actually be the biggest blunder in the
short history of the ECB. On 7 April 2011, the Governing Board increased its policy interest
rate by 25 basis points, because inflation had shot up above the 2 percent target and
economic growth had been forecasted between 1.5% and 2.3%. Speaking to MEPs, Trichet
justified the decision by saying that the Governing Council “sees the monetary policy stance
as still accommodative”.13 At the same time he supported fiscal consolidation and the
reduction of public borrowing. Not surprisingly in the fragile environment, demand
collapsed after the usual 2-quarter lag and the Euro Area fell again into recession, while in
the USA growth was sustained at a moderate level. See Figure 2. The amazing fact is that
at the first Monetary Dialogue after the rate hike, on 20 June, not even one MEP questioned
or criticised the interest decision. Instead, MEPs kept riding their hobby horses on rating
agencies and talking of constitutional quantum leaps.14 Admittedly, with hindsight one is
always smarter.15 But the case is an interesting example for how little accountability the
ECB can get away with in the context of the Monetary Dialogue with the European
Parliament. When the ECB corrected the mistake a few month later, President Draghi was
not challenged either. However, the President of the ECB explained clearly the purpose of
unconventional monetary policies, of which “the first objective is to help restore the credit
process for households and for small and medium-sized companies, because that is where
we have to work to avoid an even more significant weakening in growth than we have
already had”. Thus, unconventional policies were different from other central banks like in
the USA or the UK, because “banks represent 80% of the lending to the euro area.”16
It is, however, true that Draghi responded to certain policy concerns previously expressed
by members of the Parliament with regards to the ECB‟s mandate. In July 2012 he said:
“Our monetary analysis gives a picture consistent with price stability over the medium term
– and remember, whenever I say „price stability‟ I mean price stability in both directions,
upwards and downwards.”17 He also acknowledged criticism of austerity: “There is no
trade-off between austerity and growth. Austerity creates a short-term contraction. We
cannot dispute this. Austerity creates a short-term contraction, but we should ask the
12
13
14
15
16
17
Monetary Dialogue With Mr Jean-Claude Trichet, Brussels, Monday 22 March
http://www.europarl.europa.eu/committees/en/econ/home.html
Monetary Dialogue With Mr Jean-Claude Trichet, Brussels, Thursday 30 June
http://www.europarl.europa.eu/committees/en/econ/home.html
See Monetary Dialogue With Mr Jean-Claude Trichet, Brussels, Thursday 30 June
http://www.europarl.europa.eu/committees/en/econ/home.html
I remember defending the ECB decision myself.
See Monetary Dialogue With Mr Mario Draghi, Brussels, Monday 19 December
http://www.europarl.europa.eu/committees/en/econ/home.html
See Monetary Dialogue With Mr Mario Draghi, Brussels, Monday 9 July
http://www.europarl.europa.eu/committees/en/econ/home.html
14
2010;
2011;
2011;
2011;
2012;
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question: is this avoidable? Was the previous situation sustainable? Basically there was no
choice.”18
In summary, reading the protocols from the Monetary Dialogue conveys a sense of
progress towards a clearer way of communicating by the ECB and more pertinent questions
by MEPs. One ought to hope that the next Parliament will take up the relay.
Figure 2.
Monetary policy rates by major central banks
Lehman
7
6
5
4
3
2
1
0
99
00
01
02
03
04
05
06
07
08
09
10
11
12
Source: Bloomberg
Euro Area
Japan
USA
Real GDP growth
Lehman
6
4
2
ECB increase of interest rates
0
-2
-4
-6
-8
-10
2006
2007
2008
2009
2010
2011
2012
2013
Source: Bloomberg
Euro area (17 countries)
US
18
UK
JAPAN
See Monetary Dialogue With Mr Mario Draghi, Brussels, Monday 19 December 2011;
http://www.europarl.europa.eu/committees/en/econ/home.html
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3.2
Econometric evidence
The previous section has referred to some salient exchanges between MEPs and the
President of the ECB that may elucidate certain features and patterns in the Monetary
Dialogue, but to see how the process has worked, we need a more thorough assessment of
its impact during the life of the 7th Parliament. In accordance with the academic literature,
we hypothesize that the transparency and accountability of monetary policy would reduce
the cost of economic adjustment in the crisis. The mechanism through which these
beneficial effects would come about is a clearer understanding by financial markets of the
macroeconomic environment and the generation of more reliable expectations. This could
be interpreted as a form of “output legitimacy”, because more efficiency in the conduct of
monetary policy may increase the acceptance of the institution.19
This hypothesis can be formally tested. The alternative hypothesis would be that some
forms of communication may at times raise volatility and uncertainty. I mentioned already
that Stasavage (2003) has estimated a positive but insignificant sign for the impact of
parliamentary accountability on the cost of adjustment. Born et al. (2012) found that while
the Financial Stability Report tends to reduce volatility in financial markets, speeches and
interviews increase volatility and uncertainty. Collignon, Esposito and Lierse (2013)
confirmed that speeches by the German Chancellor Merkel have increased uncertainty
during the crisis and pushed up the spreads for Greek bond yields. In that case, the value
of the Monetary Dialogue would be the generation of “input legitimacy”, namely by the fact
that a debate among and with the elected representatives of citizens takes place and
thereby satisfies the conditions of democratic control and scrutiny.
In order to find out whether the Monetary Dialogue has had a stabilizing effect in the Euro
crisis, I have estimated a Garch model for changes in bond yield spreads of crisis countries
on a dummy variable where the day of the Monetary Dialogue takes the value 1 and 0 for
all other days. Ideally we would expect that in the day(s) after the Monetary Dialogue the
volatility in yield spreads is reduced and spreads come down or at least their increases slow
down. At least we would hope to see that volatility and uncertainty decrease.
Unfortunately, our results are not confirming the hypothesis of a stabilizing effect. The
econometric output is attached as Annex 1. Figure 3 summarises the information in a chart
that shows the aggregate effects over three days on the rate of change of spreads and on
the volatility in the bond market.
With the exception of Italy, yield spreads increased more rapidly in all crisis countries after
the Monetary Dialogue. If the general tendency was for spreads to fall, say because
financial markets felt reassured by OMT, the monetary dialogue slowed down this
reduction. Volatility increased slightly in Spain and very marginally in Italy. However, in
Greece market volatility fell while spreads increased more rapidly, which means markets
were more certain about the risks for Greece as a consequence of the information obtained
from the Dialogue. This is odd. Admittedly, the econometric estimates are not very robust
and might yield better results if we added a full-fledged economic model, but our results
are consistent with the findings by Stasavage (2003), Born et al. (2012) and Collignon et
al. (2013) who all found that statements by public authorities rarely calm markets. Actions
do. The ECB has helped to overcome the crisis by flooding banks with liquidity and setting
up formal mechanisms for intervening in the markets.
The implication of this result is that the Monetary Dialogue is less an instrument for
generating output legitimacy, but essentially contributes to input legitimacy.
19
This distinction between output and input legitimacy was made by Scharpf (1999).
16
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Figure 3.
Impact of Monetary Dialogue on Yield Spreads
and Uncertainty
Greece
0.2
Ireland
Portugal
Spain
Italy
0.18
0.15
0.1
0.04
0.05
0.03
0.01
spread
0.02
volatility
0.00
0
-0.05
-0.1
Source: ECB and European Parliament, own calculations
-0.15
3.3
-0.13
How MEPs see the Monetary Dialogue
Accountability is a two-way story. While the European Parliament takes the ECB to account,
electors will take the Parliament to account. This section reports the performance of the
members of ECON during the 7th Parliament and presents the answers to a questionnaire
submitted to all members of the ECN Committee inquiring how they assess the Dialogue
themselves.
The Committee on Economic and Monetary Affairs has 99 members, of which 43 have
never asked a question during the 5-year term of the Parliament. With respect to those
who have participated, the average number of questions per session asked by MEPs was
22.5. Sylvie Goulard was the most active member in the Dialogue with 15 questions,
followed by Jean-Paul Gauzès (13 questions), Sharon Bowles (12) and Philippe Lamberts
(11) and Elisa Ferreira (10). See Annex 2. In general, the frequency of interventions by
MEPs represents the strength of their parliamentary group in the Parliament overall,
although ALDE outperforms other groups and S&D underperforms.
The ECON Committee is made up of 67% euro area and 32% of non-euro area MEPs.
Members from the Euro Area have asked 79% of all questions addressed to the ECB
President. Representatives from Germany, France and Spain are the most active
participants in the Dialogue. Members from Greece, Ireland and Luxemburg also
participated more than their overall weight in the Parliament or the ECON would reflect.
Presumably the interest is higher when the country one represents is subject to policy
control by the Troika. MEPs from Italy, the Netherlands and Finland have participated least
in the Dialogue relative to the number of seats they have in ECON.
Out of the 99 members, 20 have responded to our questionnaire. Figure 4 shows the
frequency of questions asked by individual MEPs over the 7th Parliament. On the horizontal
axis we report the number of questions asked by one MEP (“frequency”); on the vertical
axis we show how many MEPs have asked a given number of questions and how many of
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them have responded to our questionnaire. We consider that this is a reasonably equal
distribution, which allows making general conclusions.
The results from our questionnaire show the following opinions from members of ECON.
Most MEPs (75%) say they participate regularly or always in Dialogue and so do 85% of
their staff. 85% of MEPs find the Monetary Dialogue (at least sometimes) useful for
themselves (48%), for the general public (26%), and for the ECB (19%). Broadly, the
picture is that pro-European parties on the right of center find the Monetary Dialogue more
useful than parties on the left and Eurosceptics. See Figure 5 and 6.
85% feel always (35%) or regularly (50%) well prepared for the dialogue. 74% find the
academic papers produced by the expert group useful. Figure 7 and 8.
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However, most MEPs (55%) think the Dialogue has had no impact on the management of
the crisis and most feel the ECB rarely privileges the EP over other institutions. The ECB is
also not trusted to take the opinions of MEPs into consideration when making decisions.
55% think ECOFIN is the most important partner of ECB (EP: 17%, European Council:
28%). See Figures 9-12.
Although all MEPs have responded that Central Bank Independence is “a good thing”, only
55% think ECB‟s transparency is adequate; 70% want it to publish internal minutes. Most
MEPs feel ECB is less accountable than the American FED (74%) or the Bank of England,
but in general MEPs are not well informed about democratic accountability in the most
important euro area partner countries. See Figures 13-15. Half of the responding MEPs
think that media coverage of the Monetary Dialogue is insufficient.
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4.
CONCLUSION
The accountability of an independent central bank is important, but probably less for
reasons of policy efficiency than for reasons of democratic legitimacy. Hence, the Monetary
Dialogue is and remains an essential pillar of the institutional architecture of European
Monetary Union. Our study has shown that yield spreads in most crisis countries of the
Euro area have increased in the days after the Dialogue, and MEPs correctly feel that the
Dialogue did not make a big difference for the management of the Euro crisis. However,
they do appreciate its role for informing themselves and the European public, even if they
wish an improvement of media coverage.
Not all members of the ECON Committee participate in the Monetary Dialogue, but those
who do feel well informed and prepared for their exchanges with the President of the ECB.
The quality of these exchanges has continuously improved over time. Pro-European and
centre-right MEPs view the Dialogue generally more positively than those of the left and
Eurosceptics. However, the personal commitment by some individual MEPs has been crucial
for the high quality of the exchanges.
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REFERENCES
Amtenbrink, F. and K. Van Duin. 2009. The European Central Bank before the European
Parliament: theory and practice after ten years of monetary dialogue; European Law
Review 561
Baimbridge, M., B. Burkitt and Ph- Whyman. 1999. The Bank that rules Europe? The
ECB
and
Central
Bank
Independence;
Bruge
Group
Paper
No.
37;
http://www.brugesgroup.com/mediacentre/index.live?article=101#meaning
Born, B., M. Ehrmann and M. Fratzscher. 2012. Communicating about Macroprudential
Supervision – A New Challenge for Central Banks; International Finance 15:2: 179–203
Carréa, E. , J. Couppey-Soubeyranb, D. Plihonc and M. Pourroyd. 2011. Central
Banking after the Crisis: Brave New World or Back to the Future? Replies to a
questionnaire
sent
to
central
bankers
and
economists;
http://economix.fr/pdf/seminaires/crise/articleSeminaireNanterre.pdf
Collignon, S. 2011. Eurobonds: The Financial Equivalent of the Single Currency.
European Parliament, P/A/ECON/NT/2011-01
Collignon, S., P. Esposito and H. Lierse (2013) European Sovereign Bailouts, Political
Risk and the Economic Consequences of Mrs. Merkel; Journal of International
Commerce, Economics and Policy (JICEP), Vol. 4.3.
De Grauwe, P. 2012. Economics of Monetary Union. 9th edition. Oxford University Press
De Grauwe, P. and D. Gros, 2009. Accountability and Transparency in Central Banking;
European Parliament, IP/A/ECON/ST/2008-17, PE 416.220
Dwyer, P. and Clarida, 2012. A Comparative Study of Global Central Bank
Independence and Transparency: Lessons Learned from the Crisis; Columbia University,
NY, http://sipa.columbia.edu/academics/workshops/documents/FORPUBLICATION_FRBNY_Report.pdf
Eijfinger, S. C.W. and E. Mujagic. 2004. An Assessment of the Effectiveness of the
Monetary Policy Dialogue on the ECB‟ Accountability and Transparency: A Qualitative
Approach. Intereconomics, July/August
Gros, D. 2004. 5 Years of Monetary Dialogue. CEPS Briefing Paper for the European
Parliament
Kydland, F. E.; Prescott, E. C. 1977. Rules Rather than Discretion: The Inconsistency of
Optimal Plans. Journal of Political Economy 85 (3): 473–492
Scharpf, F. W.. 1999. Governing in Europe effective and democratic? Oxford: Oxford
University Press.
Siebert, A. 2005. The European Parliament’s Monetary Dialogue with the ECB and its
Panel of Experts. Briefing note for the Committee for Economic and Monetary Affairs
(ECON) of the European Parliament for its November 2005 monetary dialogue with the
President of the European Central Bank. (mimeo)
Stasavage, D. 2003. Transparancy, Democratic Accountability and the Economic
Consequences of Monetary Instituions; American Journal of Political Science, 47.3: 389402
Vayid, I. 2013, Central Bank Communications Before, During and After the Crisis: From
Open-Market Operations to Open-Moth Policy, Bank of Canada Working Paper 2013-41
Wyplosz, Ch. 2005. European Monetary Union: the Dark Sides of a Major Success;
http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.125.2322&rep=rep1&type=
pdf
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ANNEX 1. ECONOMETRIC EVIDENCE FOR THE IMPACT OF
THE MONETARY DIALOGUE ON BOND MARKETS
It is a standard hypothesis that uncertainty affects market volatility, which increases bond
yields due to a higher risk premium. Volatility can be measured by the conditional variance
in yields, dependent on previous periods‟ variance. This is done in standard GARCH models.
However, one can also estimate the direct impact on yields or changes of yields (the
„acceleration‟). This is done by GARCH-M models, which estimate simultaneously the mean
bond yield and the conditional variance. The table below shows the results for the four
southern crisis countries. The dependent variable is the first difference of daily bond yields.
When the estimates were statistically not significant, i.e. outside the confidence interval of
5%, we have discarded the measured coefficients for Figure 3 in the text above.
Portugal
Dependent Variable: D_SP_PT
Dependent Variable: D_SP_PT
Method: ML - ARCH
Method: ML - ARCH
Date: 02/14/14 Time: 16:46
Date: 02/14/14 Time: 16:44
Sample (adjusted): 1/03/2008 1/06/2014
Sample (adjusted): 1/02/2008 1/06/2014
Included observations: 1568 after adjustments
Included observations: 1569 after adjustments
Convergence achieved after 132 iterations
Convergence achieved after 21 iterations
Presample variance: backcast (parameter = 0.7)
Presample variance: backcast (parameter = 0.7)
GARCH = C(2) + C(3)*RESID(-1)^2 + C(4)*GARCH(-1) + C(5)*DU
GARCH = C(1) + C(2)*RESID(-1)^2 + C(3)*GARCH(-1) + C(4)*DUM_MD0
C(6)*DUM_MD0(-1) + C(7)*DUM_MD0(-2)
Variable
CoefficientStd. Error z-Statistic Prob.
DUM_MD0
Mean Equation
0.030886 0.014559 2.121483
Variable
0.0339
Variance Equation
C
RESID(-1)^2
GARCH(-1)
DUM_MD0
DUM_MD0(-1)
DUM_MD0(-2)
1.38E-05
0.118257
0.900605
-0.00028
0.001914
0.005364
R-squared
-0.00107
Adjusted R-square
-0.00107
S.E. of regression0.156226
Sum squared resid
38.24518
Log likelihood 1349.487
Durbin-Watson sta
1.626282
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1.50E-06
0.006207
0.004354
0.001464
0.002655
0.002323
CoefficientStd. Error z-Statistic Prob.
Variance Equation
9.162439
19.0536
206.8586
-0.19204
0.720984
2.30913
0.0000 C
0.0000 RESID(-1)^2
0.0000 GARCH(-1)
0.8477 DUM_MD0
0.4709
0.0209
1.35E-05
0.117247
0.903041
0.005322
Mean dependent var 0.0020 R-squared
-0.00017
S.D. dependent var 0.1561 Adjusted R-squared
0.000468
Akaike info criterion -1.7124 S.E. of regression 0.156056
Schwarz criterion
-1.6884 Sum squared resid38.2108
Hannan-Quinn criter. -1.7035 Log likelihood 1349.091
Durbin-Watson sta1.627277
23
1.45E-06
0.005624
0.003902
0.001072
9.307612
20.84828
231.4484
4.963527
0.0000
0.0000
0.0000
0.0000
Mean dependent var0.0020
S.D. dependent var 0.1561
Akaike info criterion-1.7146
Schwarz criterion -1.7009
Hannan-Quinn criter.-1.7095
Policy Department A: Economic and Scientific Policy
____________________________________________________________________________________________
Ireland
Dependent Variable: D_SP_IR
Method: ML - ARCH
Date: 02/14/14 Time: 16:49
Sample (adjusted): 1/03/2008 1/06/2014
Included observations: 1568 after adjustments
Convergence achieved after 28 iterations
Presample variance: backcast (parameter = 0.7)
GARCH = C(5) + C(6)*RESID(-1)^2 + C(7)*GARCH(-1)
Dependent Variable: D_SP_IR
Method: ML - ARCH
Date: 02/14/14 Time: 16:43
Sample (adjusted): 1/02/2008 1/06/2014
Included observations: 1569 after adjustments
Convergence achieved after 16 iterations
Presample variance: backcast (parameter = 0.7)
GARCH = C(1) + C(2)*RESID(-1)^2 + C(3)*GARCH(-1) + C(4)*DUM_MD0
Variable
Variable
CoefficientStd. Error z-Statistic Prob.
Mean Equation
SQRT(GARCH) -0.01215 0.022129 -0.54895
DUM_MD0
0.024855 0.020299 1.224466
DUM_MD0(-1) -0.0058 0.012072 -0.48066
DUM_MD0(-2) 0.040148 0.01102 3.64314
0.5830
0.2208
0.6308
0.0003
Variance Equation
C
RESID(-1)^2
GARCH(-1)
2.15E-05 1.59E-06 13.52558
1.47E-01 7.52E-03 19.62456
0.881951 0.004902 179.899
R-squared
0.00009
Adjusted R-squar-0.00183
S.E. of regression0.11319
Sum squared resi
20.03804
Log likelihood 1774.258
Durbin-Watson sta
1.556522
CoefficientStd. Error z-Statistic Prob.
Variance Equation
0.0000 C
0.0000 RESID(-1)^2
0.0000 GARCH(-1)
DUM_MD0
2.08E-05
1.43E-01
0.882947
0.001305
Mean dependent var 0.0008 R-squared
-0.00006
S.D. dependent var 0.1131 Adjusted R-squa0.00058
Akaike info criterion -2.2542 S.E. of regressio
0.113018
Schwarz criterion
-2.2302 Sum squared re20.04108
Hannan-Quinn criter. -2.2453 Log likelihood 1773.971
Durbin-Watson 1.5627
24
1.45E-06
6.77E-03
0.004518
0.000503
14.35109
21.09161
195.4099
2.592376
0.0000
0.0000
0.0000
0.0095
Mean dependent var 0.0009
S.D. dependent var 0.1131
Akaike info criterion -2.2562
Schwarz criterion
-2.2425
Hannan-Quinn criter. -2.2511
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Spain
Dependent Variable: D_SP_ES
Dependent Variable: D_SP_ES
Method: ML - ARCH
Method: ML - ARCH
Date: 02/14/14 Time: 16:45
Date: 02/14/14 Time: 16:41
Sample (adjusted): 1/03/2008 1/06/2014
Sample (adjusted): 1/02/2008 1/06/2014
Included observations: 1568 after adjustments
Included observations: 1569 after adjustments
Convergence achieved after 40 iterations
Convergence achieved after 29 iterations
Presample variance: backcast (parameter = 0.7)
Presample variance: backcast (parameter = 0.7)
GARCH = C(4) + C(5)*RESID(-1)^2 + C(6)*GARCH(-1) + C(7)*DU
GARCH = C(1) + C(2)*RESID(-1)^2 + C(3)*GARCH(-1) + C(4)*DUM_M
C(8)*DUM_MD0(-1) + C(9)*DUM_MD0(-2)
Variable
CoefficientStd. Error z-Statistic Prob.
Mean Equation
DUM_MD0
0.021942 0.011247 1.950888
DUM_MD0(-1) -0.00858 0.01689 -0.50783
DUM_MD0(-2) 0.020623 0.009577 2.15335
Variable CoefficientStd. Error z-Statistic Prob.
0.0511
0.6116
0.0313
Variance Equation
C
1.81E-05 2.00E-06 9.03693
RESID(-1)^2
0.116599 0.008061 14.46386
GARCH(-1)
0.893349 0.006578 135.817
DUM_MD0
-0.00053 0.000772 -0.68996
DUM_MD0(-1) 0.002686 0.003056 0.878741
DUM_MD0(-2) -0.00211 0.002651 -0.79737
R-squared
-0.00019
Adjusted R-square
-0.00147
S.E. of regression0.099252
Sum squared resid
15.41671
Log likelihood 2057.365
Durbin-Watson sta
1.685327
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Variance Equation
0.0000 C
1.69E-05
0.0000 RESID(-1)^20.114217
0.0000 GARCH(-1) 0.894728
0.4902 DUM_MD0 0.000205
0.3795
0.4252
Mean dependent var 0.0012 R-squared -0.00015
S.D. dependent var 0.0992 Adjusted R-s
0.000483
Akaike info criterion -2.6127 S.E. of regres
0.099124
Schwarz criterion
-2.5820 Sum squared15.4162
Hannan-Quinn criter. -2.6013 Log likelihoo2055.98
Durbin-Wats
1.689885
25
1.76E-06
0.007765
0.006268
0.000317
9.623273
14.70962
142.7466
0.647985
0.0000
0.0000
0.0000
0.5170
Mean dependent var 0.0012
S.D. dependent var 0.0991
Akaike info criterion -2.6157
Schwarz criterion
-2.6020
Hannan-Quinn criter. -2.6106
Policy Department A: Economic and Scientific Policy
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Italy
Dependent Variable: D_SP_IT
Dependent Variable: D_SP_IT
Method: ML - ARCH
Method: ML - ARCH
Date: 02/14/14 Time: 16:51
Date: 02/14/14 Time: 16:50
Sample (adjusted): 1/03/2008 1/06/2014
Sample (adjusted): 1/02/2008 1/06/2014
Included observations: 1568 after adjustments
Included observations: 1569 after adjustments
Convergence achieved after 27 iterations
Convergence achieved after 17 iterations
Presample variance: backcast (parameter = 0.7)
Presample variance: backcast (parameter = 0.7)
GARCH = C(1) + C(2)*RESID(-1)^2 + C(3)*GARCH(-1) + C(4)*DUM_M
GARCH = C(1) + C(2)*RESID(-1)^2 + C(3)*GARCH(-1) + C(4)*DUM_M
C(5)*DUM_MD0(-1) + C(6)*DUM_MD0(-2)
Variable CoefficientStd. Error z-Statistic Prob.
Variable CoefficientStd. Error z-Statistic Prob.
Variance Equation
C
3.09E-05
RESID(-1)^20.116443
GARCH(-1) 0.88673
DUM_MD0 0.000729
DUM_MD0(-1
-0.00097
DUM_MD0(0.001853
R-squared -0.00011
Adjusted R-s
0.000528
S.E. of regres0.09831
Sum squared
15.15452
Log likelihoo
1994.188
Durbin-Wats
1.832967
3.44E-06
0.009047
0.007479
0.001275
0.001228
0.000604
Variance Equation
8.988012
12.87059
118.5677
0.57196
-0.79297
3.068281
0.0000
0.0000
0.0000
0.5673
0.4278
0.0022
C
2.96E-05
RESID(-1)^2 0.11046
GARCH(-1) 0.891776
DUM_MD00.001591
Mean dependent var 0.0010
S.D. dependent var 0.0983
Akaike info criterion -2.5360
Schwarz criterion
-2.5155
Hannan-Quinn criter. -2.5283
R-squared -0.00011
Adjusted R-s
0.000527
S.E. of regres
0.098279
Sum squared
15.15452
Log likelihoo
1997.177
Durbin-Wats
1.832967
26
3.26E-06
0.008511
0.007141
0.000449
9.093726
12.97901
124.8843
3.542462
0.0000
0.0000
0.0000
0.0004
Mean dependent var 0.0010
S.D. dependent var 0.0983
Akaike info criterion -2.5407
Schwarz criterion
-2.5270
Hannan-Quinn criter. -2.5356
PE 507.482
The Monetary Dialogue 2009-2014
____________________________________________________________________________________________
Greece
Dependent Variable: D_SP_GR
Dependent Variable: D_SP_GR
Method: ML - ARCH
Method: ML - ARCH
Date: 02/14/14 Time: 16:49
Date: 02/14/14 Time: 16:38
Sample (adjusted): 1/03/2008 1/06/2014
Sample (adjusted): 1/02/2008 1/06/2014
Included observations: 1568 after adjustments
Included observations: 1569 after adjustments
Convergence achieved after 12 iterations
Failure to improve Likelihood after 28 iterations
Presample variance: backcast (parameter = 0.7)
Presample variance: backcast (parameter = 0.7)
GARCH = C(4) + C(5)*RESID(-1)^2 + C(6)*GARCH(-1) + C(7)*DU
GARCH = C(2) + C(3)*RESID(-1)^2 + C(4)*GARCH(-1) + C(5)*DUM_MD0
C(8)*DUM_MD0(-1) + C(9)*DUM_MD0(-2)
Variable
CoefficientStd. Error z-Statistic Prob.
Mean Equation
DUM_MD0
0.101982 0.046924 2.173358
DUM_MD0(-1) 0.08055 0.032109 2.508644
DUM_MD0(-2) 0.010767 0.032999 0.326274
Variable
0.0298 DUM_MD0
0.0121
0.7442
Variance Equation
CoefficientStd. Error z-Statistic Prob.
Mean Equation
0.052496 0.006825
7.69182
0.0000
0.018496 0.001031 17.94725
0.645035 0.022946 28.11041
0.497056
0.0107 46.45176
-0.03748 0.001738 -21.5685
0.0000
0.0000
0.0000
0.0000
Variance Equation
C
0.075519 0.002787 27.09472
RESID(-1)^2
0.611029 0.027565 22.16681
GARCH(-1)
0.330608 0.011269 29.3373
DUM_MD0
-0.10099 0.009412 -10.7301
DUM_MD0(-1) -0.04728 0.014047 -3.36603
DUM_MD0(-2) -0.08677 0.000773 -112.287
0.0000 C
0.0000 RESID(-1)^2
0.0000 GARCH(-1)
0.0000 DUM_MD0
0.0008
0.0000
R-squared
-0.00197
Adjusted R-square-0.00325
S.E. of regression0.433031
Sum squared resid
293.4619
Log likelihood -419.617
Durbin-Watson sta
1.587361
0.0039 R-squared
-0.00084
0.4323 Adjusted R-square
-0.00084
0.5467 S.E. of regression0.432372
0.5775 Sum squared resid293.131
0.5581 Log likelihood -18.9024
Durbin-Watson sta
1.587914
PE 507.482
Mean dependent var
S.D. dependent var
Akaike info criterion
Schwarz criterion
Hannan-Quinn criter.
27
Mean dependent var
S.D. dependent var
Akaike info criterion
Schwarz criterion
Hannan-Quinn criter.
0.0039
0.4322
0.0305
0.0475
0.0368
Policy Department A: Economic and Scientific Policy
____________________________________________________________________________________________
ANNEX 2. FREQUENCY OF
INDIVIDUAL MEPS HAVE ASKED
Rank
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
MEP name
Sylvie GOULARD
Jean-Paul GAUZÈS
Sharon BOWLES
Philippe LAMBERTS
Werner LANGEN
Astrid LULLING
Burkhard BALZ
Derk Jan EPPINK
Elisa FERREIRA
Ramon TREMOSA i BALCELLS
Diogo FEIO
Antolín SÁNCHEZ PRESEDO
Gay MITCHELL
Nikolaos CHOUNTIS
Sven GIEGOLD
Liem HOANG NGOC
Olle SCHMIDT
Udo BULLMANN
Peter SIMON
Kay SWINBURNE
Pablo ZALBA BIDEGAIN
Markus FERBER
Gunnar HÖKMARK
Wolf KLINZ
Jürgen KLUTE
Rodi KRATSA-TSAGAROPOULOU
Hans-Peter MARTIN
Anni PODIMATA
Leonardo DOMENICI
Corien WORTMANN-KOOL
Marisa MATIAS
Arlene McCARTHY
Othmar KARAS
Sła o ir NITRAS
I o STREJČEK
Pervenche BERÈS
Vicky FORD
Robert GOEBBELS
Godfrey BLOOM
Group
ALDE
EPP
ALDE
Greens-EFA
EPP
EPP
EPP
ECR
S&D
ALDE
EPP
S&D
EPP
GUE-NGL
Greens-EFA
S&D
ALDE
S&D
S&D
ECR
EPP
EPP
EPP
ALDE
GUE-NGL
EPP
NI
S&D
S&D
EPP
GUE-NGL
S&D
EPP
EPP
ECR
S&D
ECR
S&D
NI
28
QUESTIONS
Nationality
FR
FR
UK
BE
DE
LU
DE
BE
PT
ES
PT
ES
IE
HE
DE
FR
SE
DE
DE
UK
ES
DE
SE
DE
DE
HE
AT
HE
IT
NL
PT
UK
AT
PL
CZ
FR
UK
LU
UK
frequency
15
13
12
11
11
11
10
10
10
10
9
9
9
8
8
8
8
7
7
7
6
6
6
6
6
6
6
6
5
5
5
4
4
4
4
4
4
4
3
PE 507.482
The Monetary Dialogue 2009-2014
____________________________________________________________________________________________
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
George Sabi CUTAŞ
Alfredo PALLONE
Sampo TERHO
Danuta Maria HÜBNER
Roberts ZĪLE
Lajos BOKROS
Sophia in 't VELD
Thomas MANN
Theodor Dumitru STOLOJAN
Marianne THYSSEN
Thijs BERMAN
Bas EICKHOUT
Roberto GUALTIERI
Eva JOLY
Olle LUDVIGSSON
Theodoros SKYLAKAKIS
Emilie TURUNEN
S&D
EPP
EFD
EPP
ECR
ECR
ALDE
EPP
EPP
EPP
S&D
Greens-EFA
S&D
Greens-EFA
S&D
ALDE
S&D
RO
IT
FI
PL
LV
HU
NL
DE
RO
BE
NL
NL
IT
FR
SE
HE
DK
Source: Protocols of Monetary Dialogue, published on
http://www.europarl.europa.eu/committees/en/econ/home.html
PE 507.482
29
3
3
3
3
3
2
2
2
1
1
1
1
1
1
1
1
1