Online ISSN 2286-0266
Print ISSN 1223-0685
© 2025 Œconomica by ASE & SOREC
 
Radu-Cristian MUŞETESCU
Academia de Studii Economice din Bucureşti
The present paper anticipates that the European Monetary Unit, the Euro, will grow stronger as compared to its US counterpart, the US Dollar, on the short and medium term. While there are many factors that have an impact on the relative purchasing power of different fiat currencies and a historical analysis in this respect is a hugely complex and speculative enterprise, a critical aspect lies in the ability of central banks to manipulate the money supply. As a central bank inflates more, the purchasing power of the monetary unit will decrease. At an international level, one currency will depreciate as compared to another currency when its central bank will be more successful in this endeavour as compared and when third parties will run away from it. Scrutinizing the relationship between political governments and central banks, this paper argues that the independence of central banking is utopian. The prospective growth of the Euro is not a result of the legal or statutory independence of European Central Bank (ECB) but of the contemporary decentralization of the European political governance. Significant negotiation and coordination costs between the different layers of European political governance as well as monetary competition with the US dollar will prevent in the near future such a successfully inflationary policy by ECB.

ŒCONOMICA no. 1/2009
Keywords: central banking, independence, European Central Bank, euro
JEL: F33, E50
Central Banks’ independence and monetary competition: Why the Euro should grow stronger as compared to the US Dollar