European Central Bank System

At the threshold of the 21st century, two unprecedented and important events happened in the world economic area: emerging a transnational central bank-ECB (European Central Bank) and a transnational currency-Euro. Central banks and currencies were originally the symbols of the national sovereignty, but now they are replaced by a unified central bank and a unified currency respectively. Acting as a supranational institute, ECB is different from other central banks in nature. It is responsible for constituting and executing the monetary policy independently. The great change of the institution which was brought about by the EMU (Economic and Monetary Union) was the establishment of ESCB (European System of Central Banks). ESCB consists of ECB and national central banks of 15 member states. On one hand it makes ECB become a central bank without any restriction from a corresponding governmental entity, and on the other hand it makes every member state become a regime without the control of its central bank.The establishment of ESCB is the inevitable result of the course of economic integration and monetary integration in Europe, and at the same time it is also the certain choice of the countries in EU under the background of the globalization of economy. ECB is an unparalleled innovation and a forward leap in the history of world economy and finance. ECB will bring about great changes in economic policy making, executing and managing among countries in EU, and it will deeply influence the world economy and international political situation. China is remote from EU in distance and is different in culture, but the two parts have great complementarity in economy. Theoretically speaking, complementarity of different economic bodies is the objective base for the development of their trade relationships. The higher is the level of complementarity, the more potential has their trade relationships to develop. China and EU have showed great complementarity in trade, investment and technological transfer, and have achieved some success in the area of financial cooperation. After entry into WTO, China will expedite the reform and opening of the domestic finance so as to catch up with theinternational economy quickly. During this process, we must learn from the successful experience of the foreign financial institutes. And the establishment and operation of the ESCB provide a valuable model for the world and other regional economic organizations. So probing into the ESCB is helpful for us to understand the evolvement of EMU and to master the tendency of the world politics and economy. It is also meaningful for us to expand our trade with EU, to perfect the function of our central bank, and to deepen the reform of our financial system.Based on the globalization of the economy, this essay discusses the establishment of ESCB and the its institutional framework and puts the emphasis on the ESCB's monetary policy, exchange rate policy and coordination of the two policies.This essay consists of three parts, including nine chapters:Part One is the basic theory, including the fist four chapters. This part analyses the natal background, the theoretical basis, the institutional framework and the main features of ESCB. In the view of the globalization of economy, the regional economic integration and the monetary integration, Chapter 1 discusses how ECB came into being. According to Treaty of European Union and Constitution of ESCB, Chapter 2 introduces the basic institutional framework of ESCB and its final aim and concrete tasks. Chapter 3 focuses on the independence of the ESCB. ECB is the most independent supranational institute in the world, and this outstanding feature is able to ensure the realizing the target of monetary policy. Depended on the theory of optimal monetary area, chapter 4 explains the basis of the form of Euro area and analyses theoretically and empirically the cost and return of taking part into the Euro area.Part Two is the policy part, consisting of chapter 5 to chapter 8. This par...