Oversight or Influence? Understanding the Impact of Monetary Dialogues

• In Event: New Research on EU (Legislative) Politics

Abstract

In the last two decades most scholarship on the interaction of the European Parliament (EP) and the European Central Bank (ECB) has focused on the EP’s role in holding the ECB accountable for following its mandate as outlined in the treaties, as well as through the new accountability measures implemented following the Euro-crisis. Less attention has been given to the impact of the EP on the monetary policy decisions taken by the ECB. Article 284(3) of the TFEU outlines the accountability mechanism for the ECB, including annual reports and hearings before the EP. These hearings have taken the form of quarterly meetings between the ECB President and the ECOFIN committee, known as the Monetary Dialogues. Previous research on the monetary dialogues have focused on their effectiveness as a mechanism of accountability. Our goal is to move beyond this to explore the extent to which there are opportunities for tangible EP policy influence via the monetary dialogues. Specifically, we seek to determine if and how the Parliament’s influence has evolved since the introduction of the monetary dialogues. Similar studies have been conducted on the impact of Congress on the Federal Reserve (Hess and Shelton 2016; Morris 2002), examining the Fed policy reactions to Congressional pressure. While there are important institutional differences in the relationship between the EP and ECB on one hand and Congress and Fed on the others, the studies provide useful tools for evaluating the EP’s influence beyond accountability as supervision.

This study examines the relationship between the EP and the ECB, and the policy influence exerted by Parliament, through the quarterly Monetary Dialogues. Using transcripts of monetary policy dialogues, we classify types of EP policy questions and requests, and compare these ‘policy communications’ to subsequent ECB Governing Council monetary decisions and “other decisions”. To measure ECB policy decisions, we review both the accounts of Governing Council meetings to discuss monetary policy decisions (i.e. interest rate decisions), released four weeks after the meetings, and ‘other decision’ accounts of all non-interest rate related decisions taken during Governing Council meetings. In addition, we examine changes to the three key interest rates and other monetary tools, such as targeted longer-term refinancing operations (TLTROs) and asset purchases.

Authors

• Corinne Tomasi, University of Florida

• Amie Kreppel, University of Florida