The
Governing Council of the ECB is made up of the six members of the Executive
Board of the ECB and the governors of the 11 national central banks participating
in the EMU. The Governing Council determines EU monetary policy; the Council
discusses current and near-term economic and financial conditions prior
to making a decision to raise, lower, or keep short-term interest rates.
To help students understand the decision-making process in the Governing
Council, have them participate in the following simulation:
Student
Roles - assign students the roles below:
Number
of
Students |
Students
Role(s) |
| 1 |
ECB
Executive Board Chairman (chairman of the Governing Council); conducts
meetings according to the agenda below |
| 5 |
ECB
Executive Board Members |
| 1 |
Representative
of the EU Commission (non-voting) |
| 1 |
Representative
of the European Council (non-voting) |
| 11 |
Governors
of each participating Member State's national central bank (where there
are any students left over, the Governor slots should be occupied by two
students) |
Preparation
for the Simulation - The 11 Governors and the Executive Board
members should be given 2 weeks to prepare for their roles by researching
the current status and future projections for the following list of
economic indicators:
-
Real Gross
Domestic Product
-
Consumer
Price Index (CPI)
-
Unemployment
The 11
Governors should research the relevant data for their particular country,
while the Executive Board members should research data on the EU as a single
entity.
Agenda
for the Simulation
A.
Chairman calls the meeting to order
B.
The Executive Board members present the following:
-
An analysis
of current economic conditions
-
A discussion
of prospects for economic, financial, and international conditions for
the near future
-
An identification
and discussion of economic issues of special concern at the present time
or in the near future
-
A recommendation
as to whether short-term interest rates should be raised, lowered, or kept
the same
C. Each
Governor makes a short presentation along the same lines, but does so from
the perspective of their country
D.
Chairman offers recommendations regarding the direction for short-term
interest rates
E.
Each governor and Bank President makes a recommendation regarding the direction
for short-term interest rates (remember that each Governor of the national
central banks is required to act in the interests of the European Union
as a whole and is not on the Council to solely represent their country)
F.
The representatives of the Commission and the Council of Europe make recommendations
on the direction of short-term interest rates
G.
The Executive Board members and the 11 Governors vote on a change in interest
rates and the majority preference is adopted
Simulation
Debriefing - After the simulation is completed, have students answer
the following questions:
-
What did
you learn from this simulation about the way the ECB is likely to develop
monetary policy?
-
What evidence
was presented here to suggest that short-term interest rates should be
raised? What was the strongest evidence for raising interest rates?
-
What evidence
was presented here to suggest that short-term interest rates should be
lowered? What was the strongest evidence for lowering interest rates?
-
What arguments
could you make for keeping short-term interest rates at their current level?
-
How can
you explain the secrecy of voting decisions within the Governing Council?
Is this a good idea?
-
Would
it be a good idea to give the representatives of the Commission and the
Council of Europe a right to vote? What effect would this have?
The
following is based on a simulation of the Federal Open Market Committee,
developed by the Federal Reserve Bank of New York.
Link:
www.ny.frb.org/pihome/educator/fomcsim.html#agenda
____________________________
Part
II. EMU [1] [2] [3]
[4] [5] [6]
[7] [8] [9] [10]
Composition