The Activation Conditions of the Transmission Protection Instrument: Flawed by Design?

Ivo J.M. Arnold*

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

In 2022, the European Central Bank (ECB) introduced the Transmission Protection Instrument (TPI) to counter the risk of financial fragmentation following the normalisation of monetary policy. The ECB has specified conditions under which the TPI can be activated. This paper examines these conditions and concludes that the activation conditions cannot be applied in an objective and transparent manner. This provides the ECB room for policy discretion and makes the ECB susceptible to pressure from member countries. A possible interpretation is that the activation conditions serve as a fig leaf to cover ECB policies that may go beyond its mandate.

Original languageEnglish
Pages (from-to)254-259
Number of pages6
JournalIntereconomics
Volume58
Issue number5
DOIs
Publication statusPublished - 1 Sept 2023

Bibliographical note

Publisher Copyright:
© The Author(s) 2023. Open Access: This article is distributed under the terms of the Creative Commons Attribution 4.0 International License.

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