Mere criticism of the ECB is no solution

Publication: Policy Letter No. 51
Topic Area: Macro and Finance
Authors: Marcel Fratzscher,
Reint Gropp,
Hans-Helmut Kotz,
Jan Pieter Krahnen,
Christian Odendahl,
Beatrice Weder di Mauro,
Guntram B. Wolff
Date: Apr 2016
Keywords: eurozone, crisis, monetary policy

The eurozone remains in a deep, largely macro-economic crisis. A robust global economy and falling oil prices have supported Europe’s economy for some time, but by now it is clear that the eurozone will only be able to pull itself out of this crisis by means of more decisive action. One response, the recent easing of monetary policy by the European Central Bank (ECB), has, for the most part, been sharply and one-sidedly criticised in Germany. Monetary policy inaction seems to be the preferred option of many in Germany.

The authors discuss the following question: What would happen if the ECB failed to respond to the excessively low inflation and the weak economy? And what economic policy would be suitable under the current circumstances, if not monetary policy?

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