Introduction to a Symposium on Central Banks after EMU

The start of the European Central Bank in 1999 is often compared to the start of the Federal Reserve System in 1913. There are similarities. Both started as federal systems with substantial operating responsibilities at the regional or national levels. Both left important responsibilities to the regions or nations.

There are many differences, not the least of which is that the European system incorporates national central banks with long histories of successful operations. In contrast, the Federal Reserve System created de novo regional banks several of which were too small to be efficient. The designers of the Federal Reserve System believed that each Reserve bank would operate as a semi-autonomous institution, setting its own discount rates and cooperating in portfolio decisions only when it chose to do so. This feature survived on paper, but only partly in practice, until 1936, when legislation centralized control and authority. Nevertheless, as late as 1932, individual Reserve banks declined to participate in open market operations.