The Battle of Ideas on the Euro Crisis: Evidence from ECB Inter-Meeting Speeches

Federico Maria Ferrara (2020) The battle of ideas on the euro crisis: evidence from ECB inter-meeting speeches, Journal of European Public Policy, 27:10, 1463-1486, DOI: 10.1080/13501763.2019.1670231

47 Pages Posted: 8 Feb 2019 Last revised: 11 Jan 2021

See all articles by Federico Maria Ferrara

Federico Maria Ferrara

London School of Economics and Political Science

Date Written: March 2, 2019

Abstract

The European Central Bank (ECB) has often been portrayed as highly resistant to ideational change. This paper paints a different picture. A battle of ideas dominated the academic debate on the euro crisis: one view stressed crisis-stricken countries' fiscal laxity, whereas the other highlighted the systemic roots of financial turmoil. I argue that the failure of policy experiments inspired by the fiscal discipline view favoured the ECB's adoption of systemic risk ideas, which shaped its crisis response. Empirically, I use an innovative technique combining automated text classification and unsupervised scaling methods to detect ideational variation in ECB Executive Board members' public speeches. Results indicate that the ECB has progressively moved from a fiscal to a systemic narrative of the euro crisis. Significantly, this shift anticipated and accompanied the ECB's commitment to unlimited bond purchases in summer 2012. Evidence suggests that this ideational turn was incremental and driven by policy learning dynamics.

Keywords: European Central Bank; Political Economy; Economic Ideas; Quantitative Text Analysis; Euro Crisis

Suggested Citation

Ferrara, Federico Maria, The Battle of Ideas on the Euro Crisis: Evidence from ECB Inter-Meeting Speeches (March 2, 2019). Federico Maria Ferrara (2020) The battle of ideas on the euro crisis: evidence from ECB inter-meeting speeches, Journal of European Public Policy, 27:10, 1463-1486, DOI: 10.1080/13501763.2019.1670231, Available at SSRN: https://ssrn.com/abstract=3323844 or http://dx.doi.org/10.2139/ssrn.3323844

Federico Maria Ferrara (Contact Author)

London School of Economics and Political Science ( email )

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