On 16 January 2024, the second ECB@25 Symposium was hosted by Professor Mary Pieterse-Bloem (Erasmus School of Economics Professor of Financial Markets) at our Pavilion. The first ECB@25 Symposium was held on 7 July 2023, on the 25th anniversary of the ECB, and was graced by prominent Dutch speakers (The 25th anniversary ECB Symposium).
This second symposium coincided with the 25th anniversary of the introduction of the euro and gave the floor to international speakers with a highly distinguished and long-standing academic track record in monetary economics. Participants from academia, public and financial institutions, as well as PhD candidates and Master students from Erasmus School of Economics attended the symposium.
|13:00 – 13.15hrs: Opening by Mary Pieterse-Bloem & Sylvester Eijffinger
|13:15 – 14.00hrs: Paper presentation by Paul De Grauwe and Yuemei Ji – How to conduct monetary policies. The ECB in the past, present and future (a paper co-authored with Yuemei Ji)
|14:00 – 14.45hrs: Paper presentation by Charles Goodhart – Beyond the Great Moderation
|15.00 – 15.45hrs: Paper presentation by Menzie Chinn, Jeffrey Frankel and Hiro Ito – The Dollar versus the Euro as International Currencies
|15.45 – 16.45hrs: Panel Discussion led by Sylvester Eijffinger (Emeritus Professor at Tilburg University)
|16:45 – 17.00hrs: Closing remarks by Mary Pieterse-Bloem
Paul De Grauwe
Paul De Grauwe, John Paulson Professor of European Political Economy at London School of Economics and Political Science (LSE) and Emeritus Professor at the Catholic University of Louvain (KUL), presented an analysis of how the operating procedures of the ECB have changed over time, and of the factors that drove these changes. The most poignant points were made on the present reserve abundant regime: De Grauwe and Ji argue that the rate rises, needed to fight inflation, have in the present regime caused the ECB to effectively transfer a large amount of money, estimated at approximately 146 billion euro, to banks in the eurozone. The two main problems of this transfer are a loss of effectiveness of monetary policies and societal unfairness for taxpayers. Hence De Grauwe and Yuemei Ji are proposing an alternative operating procedure: a two-tier system of reserve requirements.
The Slide Decks of all the presentations can be downloaded at the bottom of the page
Charles Goodhart (LSE), Emeritus Professor, previously Norman Sosnow Chair of Banking and Finance, also formerly External Member of the Monetary Policy Committee of the Bank of England, took a longer term perspective on central banks’ ability to maintain price stability. His main point is that central banks had it easy over the past thirty years, from an abundance of labour, globalization and China and Eastern Europe entering the world trading system, fueling economic growth in a non-inflationary way. Central banks take too much credit for these outcomes, and have been excessively worried about a deflationary spiral. Unfortunately for the young, the next 25 years are not looking particularly good because the three Ds, Demographics, Deglobalisation and Decarbonisation, are all going to be very taxing for the world economy, and will lead to inflationary pressures in an environment where debt ratios in a number of countries are already high. As for demographics, Goodhart is particularly concerned about the likely growing number of incapacitated elderly amongst the ageing population which many countries cannot afford to care for adequately. His prediction is that 2024 will be a comfortable year for Central Banks, but that 2025 and future decades will be much more challenging.
Menzie Chinn, Jeffrey Frankel and Hiroyuki Ito
Menzie Chinn, Professor at the University of Wisconsin-Madison, Jeffrey Frankel, Professor at Harvard Kennedy School of Harvard University and Hiro Ito, Department Chair Professor at Portland State University presented an update of a paper published by Menzie Chinn and Jeffrey Frankel together some 19 years ago entitled “Will the Euro Eventually Surpass the Dollar as Leading International Reserve Currency?”. In this 2005 paper they found that the Euro would catch up with the Dollar by 2020, provided that the UK and Sweden would join the eurozone and that the Dollar would continue its trend depreciation. Together with Hiroyuki Ito, Chinn and Frankel now conclude that neither of those two things happened: the Euro’s share stayed below 20%. The extensive empirical analysis conducted in this latest paper shows that the Dollar retains dominance as reserve currency, due to its use as anchor currency, the US economy’s size and that the euro is held in large part due to trade as international reserve currency.
A lively discussion followed by the speakers and the participants moderated by Sylvester Eijffinger on the likelihood that non-interest bearing minimum reserves of banks in the eurozone will be raised by the ECB, on ways for Europe to make the caretaking of the incapacitated elderly affordable and on whether the introduction of the digital euro will be a game changer for its international reserve currency status.
The symposium was closed by Mary Pieterse-Bloem, after which Charles Hermans, Director of Alumni Affairs at Erasmus School of Economics, presented the Biography of Jan Tinbergen: ‘Jan Tinbergen (1903-1994) and the Rise of Economic Expertise' by Erwin Dekker, to the speakers of the second ECB@25 symposium at Erasmus University Rotterdam.