Monetary Governability in the Euro Area: Governing through Money, Trust, and Expectations
While monetary policy had already long replaced fiscal policy as the preferred instrument of macroeconomic governance, in the wake of the global financial and economic crisis the perceived dominance of central banks has further increased. Yet it is not a natural characteristic of an economy to be governable by means of monetary policy [Why models matter]. Focusing on the euro area, this research investigates the economic and social conditions that underpin – and when disrupted undermine – monetary governability. Three challenges to governability occur at different points in the transmission mechanism of monetary policy. First, effective central bank control of the interbank interest rate depends on the existence of a transnational and “efficient” interbank market [Financial consequences of Mr. Draghi]. Second, the “transmission” of this interest rate signal through the economy requires financial and non-financial firms as well as households to form and act upon macroeconomic expectations in line with the central bank’s intentions [Governing the future]. Third, while central bank communication to households does not aim at minute expectation management, this group’s trust in the central bank and in the future value of money is nevertheless essential to the transmission mechanism of monetary policy [Speaking to the people]. Benjamin drew on this work when he authored a policy report on the independence and accountability of the European Central Bank, published in March 2017 by Transparency International [Two sides of the same coin].
The Political Economy of Asset-Manager Capitalism and Patient Capital (started in 2017)
The rise of asset management companies (AMCs) such as BlackRock and Vanguard is transforming capitalist economies. AMCs invest capital on behalf of institutional investors such as pension funds and insurers, as well as retail investors. They occupy a central position in the investment chain, which connects the ultimate providers of capital (households) to the ultimate users of capital (firms). In light of the unprecedented sizes of the biggest AMCs, it is fair to say that in terms of corporate ownership and control, the global economy has entered a stage of asset-manager capitalism [ETFs and asset manager capitalism]. At the heart of this project stands the question, central to comparative political economy, of the nature and the sources of long-term, “patient” capital. The varieties-of-capitalism framework routinely treats market-based capital as inherently “impatient.” However, the size and predominantly passive investment strategies of AMCs virtually force them to act as patient investors. This project therefore treats the (im)patience of market-based capital as an empirical question and contributes to our understanding of the temporal structures of capitalism. To understand how the global rise of AMCs interacts with national institutions and affects power relations within investment chains, the project will conduct a comparative analysis of the United States, Germany, and the Netherlands.