The ECB Under the Threat of Fiscal Dominance – The Individual Central Banker Dimension

Abstract This paper examines the threat of fiscal dominance for central banks with a focus on individual dimension. A general symptom is feedback loop from sovereign debt developments to monetary policy decisions. Our theoretical reasoning clarifies under which assumptions members in federal bank system should pay particular attention their home regions’ public situation. We present empirical evidence existence such repercussion context ECB Council. Based statements regarding Pandemic Emergency Purchase Programme (PEPP), we classify governors euro area national (NCB) and board as “hawks”, “neutrals,” “doves”. correlate resulting classification countries’ level. The pattern consistent what can be expected regime dominance. Whereas doves tend come high-debt countries, average level hawks’ countries significantly lower. As expected, this even more pronounced NCB presidents than members.