Wednesday, March 21, 2012

Models: The Fed vs the ECB

Does the Euro crisis show that the Fed (US Federal Reserve) model is more effective than the ECB model?

The latter focuses on minimization of inflation, a "single directive" (think by analogy "The Terminator" robot and its single directive) inherited (mainly) from the Bundesbank whereas the Fed's model cares about employment and other economic parameters, not just inflation.

Food for thought!

Extra question:

Why did the makers of the Euro give such a narrow mandate to the ECB?

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