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Paper Topic:

The US Federal Reserve versus the European Central Bank

THE US FEDERAL RESERVE VERSUS HE EUROPEAN CENTRAL BANK

TABLE OF CONTENT

INTRODUCTION

COMPARISON BETWEEN THE US FEDERAL RESERVE AND ECB

INFLATION AND UNEMPLOYMENT

Which has shown better results in keeping the overall economy with their respective countries stable

CENTRAL BANK 'S DEGREE OF INDEPENDENCE

Empirical theory

Theoretical theory

CONCLUSION

INTRODUCTION

This will analyze the difference between U .S . Federal Reserve and the European Central Bank . Provide assumption on which central banking system is able to provide stability on its respective country based on their

approved mandates and what are the degrees of independence does Central Bank benefit from both in theory and reality and determine which central bank is able show better results in keeping the overall economy of its respective countries stable

COMPARISON BETWEEN THE US FEDERAL RESERVE AND EUROPEAN CENTRAL BANK

The comparison of the Eurosytem and the Federal Reserve System is based on the following : institutional structure , the monetary policy strategy the monetary policy instruments and the operating procedures of the two central banks as the focal point . In the study conducted by Karlheinz Ruckriegel and Franz Seitz they concluded that the structure of both institutions has similarities but the main tasks and the legal status are by far different . The main task of the Eurosytem is price stability while Federal Reserve objective is price stability and full employment achieving both all at the same time

Ruckriegel and Seitz believe in the importance of the independent status of the Eurosytem by international law (EU Treaty ) gives an edge of the Federal Reserve System since the status of the Federal Reserve depends on Congress . The Constitution gives Congress the power to set its value . Therefore , the Federal Reserve 's power is limited to views of the Congress . They also noted the similarities in the operating procedures of monetary policy of both institutions , similarities in the design of the minimum reserves and the operating target . In both cases the overnight interest rate is the operating target of monetary policy Apart from required reserves , the instruments of monetary policy are different . The differences can be traced back to historical factors legal problems of the change of existing arrangements and a different understanding of monetary policy . In this context the Eurosytem has the advantage of introducing all arrangements according to the knowledge of monetary policy and theory

Therefore both classified the Eurosytem as the superior system under efficiency viewpoint . Especially , the obvious absence of strategy on the side of the Fed for several years

INFLATION AND UNEMPLOYMENT

The difference between the US Federal Reserve and European Central Bank is that the first has a dual mandate which has an objective of prioritizing full employment and price stability at the same time whereas ECB is under the hierarchical mandates which the principal objective is stability other objectives is pursued once the inflation objective is met

The dual mandate of the Federal Reserve helps stabilize the inflation and unemployment situation of the country . The dual mandate simply states to promote...

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