The Failure of ECB Monetary Policy from a Mises-Hayek Perspective

Schnabl, Gunther

doi:10.1007/978-3-319-75817-6_7

Cited by 15 publications

(8 citation statements)

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“…The austerity in the public and private sector beclouded the business climate in Germany, causing investment and growth to decline after the turn of the millennium. Household savings 24 Based on the monetary overinvestment theory of Mises (1912 ) and Hayek (1931), Schnabl (2017 ) argues that too low interest rates lead to unsustainable investment booms and speculation in finan cial markets, therefore constituting the pre-step for crisis. 25 The different economic cycles within the European Monetary Union since the turn of the millennium are usually attributed to the interest rate convergence process in southern Europe (see Sinn and Wollmershäuser 2012).…”

Section: The Failure Of the Common Monetary Policy In A Heterogeneousmentioning

confidence: 99%

“…31 Pre-cris is, stock and real estate prices exploded in southern Europe, Ireland and other European countries. Now, the exuberance has shifted to Germany (see Schnabl 2017). Fifth, freedom of contract in financial markets is undermined, because financial exubera nce is followed by growing regulation (macroprudential measures) to prevent new crises in the future.…”

Section: Monetary Expansion and The Erosion Of Market Forcesmentioning

confidence: 99%

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The Brexit as a Forerunner: Monetary Policy, Economic Order and Divergence Forces in the European Union

Schnabl

Müller

2019

The Economists’ Voice

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The paper analyzes the effects of the increasingly expansionary monetary policies on the economic order in Europe and the European integration process. It is argued that a liberal market order and a tight monetary policy stance shaped in postwar Germany and in United Kingdom have long served as cornerstones for growth, prosperity and social cohesion in Europe. A prolonged loose monetary policy stance of the European Central Bank has undermined these orders, thereby diminishing productivity gains and growth. Combined with negative distribution effects, those monetary policies constitute the breeding ground for divergence forces in the European Union as heralded by the Brexit.

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Section: The Failure Of the Common Monetary Policy In A Heterogeneousmentioning

confidence: 99%

Section: Monetary Expansion and The Erosion Of Market Forcesmentioning

confidence: 99%

The Brexit as a Forerunner: Monetary Policy, Economic Order and Divergence Forces in the European Union

Schnabl

Müller

2019

The Economists’ Voice

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“…For example, the unusually low interest rates of the early and mid‐2000s—which departed from the Taylor Rule—helped push up real estate prices and construction (Taylor ). Building off theories of monetary overinvestment, Schnabl () shows that since the early 2000s, ultra‐loose monetary policy in the periphery of the European Monetary Union raised the likelihood of overinvestment booms that could spawn financial and economic imbalances. Nevertheless, interest rates alone are insufficient to directly explain the vast bulk of the subprime boom and bust of the 2000s.…”

Section: Addressing Macroprudential Real Estate Risksmentioning

confidence: 99%

Real Estate and the Great Crisis: Lessons for Macroprudential Policy

Duca

Popoyan

Wächter

2017

Contemporary Economic Policy

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractFrom a broad macro-financial structure perspective, overly easy credit conditions gave rise to house price booms and busts in several advanced economies (e.g., Ireland, Spain, and the U.S.), and, more specifically in the U.S., an underpricing of risk made possible by regulatory arbitrage and shadow financing fueled the credit and twin real estate bubbles of the mid2000s. Across countries and over time bubbles have been particularly acute in real estate markets reflecting not only the relatively inelastic supply of land and thin trading of real estate, but also the amplification of shocks via backward-looking price expectations and the funding of consumption off distorted and elevated prices. The macro-prudential lessons from the Great Crisis highlight the need to prevent the build-up of excess real estate financing and limit the amplification and correlation of real estate risks. And progress has been made in each of these areas through imposing tougher or new restrictions on the choice sets of lenders or of borrowers, with particulars varying across advanced economies. While regulatory reform of banking is going forward, significant challenges remain especially in dealing with correlated risks associated with securitization.

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“…As an empirical matter the monetary policy of the European Central Bank is from a Mises-Hayek perspective a failure in several regards as analyzed by Schnabl (2017). But can central bank monetary policy conceivably be effective--let alone optimal--in the first place?…”

Section: Illustrating the Relevance Of Research In Monetary-constitutmentioning

confidence: 99%

Monetary Constitutionalism: Some Recent Developments

Hauwe

2017

SSRN Journal

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The volume edited by Leland Yeager more than 50 years ago and published in 1962 under the title In Search of a Monetary Constitution has turned out to be remarkably prescient since the Great Inflation was then about to begin. One might expect that in the wake of the Global Financial Crisis and Great Recession interest in monetary-constitutional matters would be revived and this has indeed been the case. In this paper an attempt is made to assess whether and to what extent scientific progress has been made in defining the nature and characteristics of a monetary constitution for the post-Crisis world. To that end some recent contributions to the literature are reviewed critically. IntroductionDespite some contributions to the economic literature that have acknowledged the role of central banks in the financial crisis and how these institutions have contributed to the Great Recession and the meager recovery thereafter (see e.g. Hetzel 2012), most economists have been more interested in analyzing the technical role that monetary policy played during and after the crisis, thus taking the existent framework as given, than in considering and addressing alternative frameworks for monetary policy. Some economists have not only been supporters of the current hypothetically optimal monetary framework but have even argued in favor of further enhancements on central bankers' discretionary powers. Several economists such as Nobel Prize winners Buchanan, Friedman and Hayek, however, had addressed the technicalities of monetary policy within the context of broader political economy concerns. Their proposals should be situated within the more general framework of institutional and constitutional reforms of the rules of the "monetary policy game". It is in the tradition of these contributions that we review some recent contributions without being exhaustive. The aim is to raise questions and to stimulate the intellectual debate rather than to provide conclusive answers. The Yeager 1962 volume and afterLeland Yeager's decision more than 50 years ago to organize a lecture series and the resulting volume on monetary constitutions (Yeager 1962) has turned out to be unusually prescient. It has been suggested that much damage might have been avoided if the world had listened to the message of the Yeager volume and subjected its central banks to the restrictions of a monetary constitution in the 1960s. (Rockoff 2015) In the aftermath of the 3 Global Financial Crisis one would expect thoughtful discussion of monetary constitutions to resume and this has indeed been the case. In this paper we will review some recent contributions to this debate and try to assess if, and to what extent, scientific progress has been made in the search for a monetary constitution. "A great deal of contemporary monetary scholarship (…) has concentrated on piecemeal and detailed study of our existing monetary structure and its performance. (…) The reforms proposed have generally been correspondingly minor. Meritorious though this detailed work has be...

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The Failure of ECB Monetary Policy from a Mises-Hayek Perspective

Cited by 15 publications

References 23 publications

The Brexit as a Forerunner: Monetary Policy, Economic Order and Divergence Forces in the European Union

The Brexit as a Forerunner: Monetary Policy, Economic Order and Divergence Forces in the European Union

Real Estate and the Great Crisis: Lessons for Macroprudential Policy

Monetary Constitutionalism: Some Recent Developments

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