Did ECB change its policy stance in the 2008 crisis?

Not at all.

In this paper, a team of economists say ECB stuck to its mandate of price stability despite the huge crisis. They also look at whether ECB has taken decisions being influenced by it member economies. Again the answer is No. Hence, earlier criticisms that ECB will get politicised by member economies has not been true. ECB is a strong independent central bank.

By updating the Taylor rule study of Gorter et al. (2008), we analyze the stability of the coefficients of expected inflation and expected output growth, thereby addressing the question whether the ECB has changed its policies due to the recent crisis.  Our results suggest that the ECB – in line with its mandate – puts a stronger emphasis on maintaining price stability than earlier point estimates of Taylor rule models indicated.

In addition we address whether regional developments have affected ECB policies. Some critics of the governance structure of the ECB “think the institution and the process will be unavoidably politicised – member countries facing asymmetric shocks will want the ECB to follow different policies, the country governments will be able to influence their representatives on the ECB to fight for the national interest, and exert pressure through other channels of operation of the European Union, and at least sometimes succeed in bending the ECB’s policies.” (Dixit, 2000, p. 759). Despite the diverging economic developments in the countries in the euro area, notably during the recent financial crisis, we do not find support for the view that policy decisions have been influenced by regional developments.

Crisp and short.

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