¶ … ECB can be successful at emulating the strategic model set forth by the German Bundesbank. The discussion will focus on the fact that the ECB is facing different problems as it is still in the developmental phases. The investigation will seek to determine whether the tools of the Bundesbank can provide support for the ECB in achieving economic stability in the European Monetary Union. Research about this particular topic is important because the European Union is expected to expand in the years to come. In addition, many members of the European Union have opted to have a single currency. This means that economic stability is even more essential in ensure that the European Monetary System is economically efficient.

The methodology for this research will encompass several forms. Firstly, the research will contain background information about the ECB and the Bundesbank. In addition, the research will contain a literature review to give the reader and the researcher an understanding of prior research. Data for the literature review will be obtained from secondary sources such as periodicals.

The research will also contain information taken from the internet. The internet sources will be limited to official websites for the ECB and the Bank of England. It will also contain information gathered from internet databases.

Interviews will also be conducted to determine various points-of-view about the ECB. These interviews will be conducted with members of the ECB along with the public. The researcher is seeking to discover if the public perception of the banks performance is an accurate depiction of the actual performance of the bank.

Once all of this data has been gathered, it will be used to compare the banks to one another. This will enable the researcher to determine if the ECB can be successful at implementing the standards that have been established by the Bundesbank. It will also provide answers as to whether the structures of the banks are identical.

Overview of literature review

The Goals of central banks are broad ranging but tend to focus on price stability. The current role of the Central Banks is still developing with many arguing that current tasks are inadequate in most banks, despite the model of the Bundesbank. Both Bob Mundell and Milton Freidman agree that when it comes to managing monetary policy the overall record of central banks is very poor (Dowd, 2001).

Central banks have been in existence for centuries, but the role and operation has differed greatly. Central banking texts often look to the beginning of central banking at the end of the seventeenth century with the creation of the Bank of England. The evidence of Britain's superior economic, financial and military being credited, in part at least, to the creation and operation of the central bank (Weingast, 1992, North and Weingast, 1989).

The Bank of England has been essential to the economic stability of the UK. According to a book entitled The Bank of England, 1891-1944 Vol. 2 that since the foundation of the bank in 1694 it operated as a joint-stock company. Sayers (1996) also asserts that "Between 1890 and 1946 the formal constitutional arrangements of the Bank were modified only once, by a Supplemental Charter granted in 1896, though its duties, in relation for example to the issue of notes and payments in gold, were affected by twelve Acts of Parliament between 1913 and 1939." (pp 593) Indeed, the Bank of England was one of the first stable central banks in the world.

The Bundesbank is also a central bank that has received a great deal of attention. The Bundesbank has served as a benchmark for central banks for many years. The Bundesbank is important in understanding how central banks function. Frazer (1994) explains that the Bundesbank was once a dominant force in the reestablishment of the German economy. Engelen (2002) argues that the once dominant Bundesbank is now secondary to the European Central Bank.

The European Central Bank is now the primary bank for the European Union. (Dyson and Featherstone 1999) argue that the ECB was created for providing the EMU with monetary policy. Dunn (2001) explains that there have been many problems associated with the management of the institution. The author argues that,

"The years 1999 and 2000 have provided a difficult beginning for the European Monetary Union (EMU) and for its managing institution, the European Central Bank (ECB). The euro, which was almost universally expected to be a strong currency, has depreciated sharply and is now the source of widespread negative commentary. Citizens of Denmark voted against joining the monetary union by a considerably larger majority than had been anticipated, and there is now virtually no chance that a referendum for entering the EMU could pass in the United...

The management of the ECB has been widely criticized, with its president being the frequent target of unkind press comments. (Dunn 2001, pp 14)
Discussion and Conclusion

As you can see the information found thus far asserts that the Bundesbank is a benchmark for many central banks. The research also suggests that the ECB has had trouble in the implementation of the banking system. The proposed research will delve into these subjects in more detail to determine is the ECB has the ability to duplicate the success of the Bundesbank.

1. Chapter

Case study research: The Deutsche Bundesbank and the European Central Bank

Will the European Central Bank be as successful as its successor the Bundesbank? -- The formation and Role of the German Bundesbank

To identify the association and evaluate the potential of the ECB to perform at the same level of professionalism and achievement as the Bundesbank, we need to garner a better understanding of the Bundesbank. This can be accomplished with a detailed explanation of the Bundesbank banking system; including, the development that lead to the success that the Bundesbank experienced in the last few decades.

The German Bundesbank came to prominence following the Second World War. The steady development of the bank was in response to the political and economic climate. Ultimately, Bundesbank became the benchmark for many other European Banks. The Bundesbank has played an important function in the creation and development of the ECB.

According to a book entitled "Fifty Years of the Deutsche Mark: Central Bank and the Currency in Germany since 1948. Article 3 of the Bundesbank asserts, "Bundesbank regulates the amount of money in circulation and of credit supplied to the economy, and arranges for the execution of payment transactions. Its goal is to safeguard the currency, meaning to safeguard the value of money (Baltensperger 1999, 219)."

The Bundesbank was very successful in its endeavours to maintain economic stability. In fact, the Bundesbank has been historically regarded as one of the finest banking systems in the world. The founding of the Deutsche Bundesbank also called the Bank deutscher Lander came at a pivotal time in European history.

Today, Germany may be viewed as being fashioned by post World War II allies and the influence that they had on the economic and political climate of the country. In particular, the Soviet Union and the United States both sought to influence the region according to their own interests and vision for the future (de Hann, 2003). This political scenario aided the development of the Bundesbank (de Hann, 2003). Germany was in a strategic position, and during the cold war, these former allies believed that Germany was essential to winning the cold war. This belief was based on the premise that Germany was a conduit to mainland Europe.

In 1949, the German constitution was created, and was influenced by the United States (Uwe, 1994). The Grundgesetz (the basic law), created two authorities, the Bund which is comparable to the federal authorities in the United States and the Land, which is akin to the state authorities (Uwe, 1994). This had the effect of reviving the federalism tradition that had existed in Germany in the past. (Uwe, 1994).

The structure of the Bundesbank is a replica of the Grundgesetz and the Bund, as stated in the constitution (Uwe, 1994). It is worth noting that in Article 88 the framers foresaw the need to create a central bank in the future. Nevertheless, details concerning how the central bank should be formed were not pinpointed which allowed for future legislation (Uwe, 1994). Prior to the creation of the Bundesbank, the Bank deutscher Lander (BdL -- Bank of German States) dictated monetary policy. In addition, this bank had the task of co-ordinating the central banks of the regional states known as the Lander (Uwe, 1994).

The Bank deutscher Lander was an independent bank; as such, it was not controlled by the government. It was organised into regional offices, which were based in the Lander. However, the banks policies were not independent at this stage, as they required a level of approval by the Allied Banking Commission that governed the western zone (the area that the Soviet Union did not have control). The bank had the power of veto (Uwe, 1994).

Even though this veto existed it was never used, this may be due to the manner in which Wilhelm Vocke, the president of the…