Teacher's booklet - the Generation ?uro Students' Award

Generation €uro
Students’ Award
Teacher‘s booklet

Index
FOREWORD
Generation €uro Students’ Award 4
– Objective 4
– Overview 4
– Participants 4
– Rounds 4
1. Teachers 5
– Your role 5
– Resources 5
2. Rounds 5
– Online quiz 5
– Essay 5
– Presentation 6
– Question and answer session 6
3. Composition of the jury 7
4. Assessment criteria 7
5. Prizes 7
6. European award event 7
7. Privacy statement 7
Annex: Introduction to central banking and
monetary policy within the euro area 8
It is a great pleasure for me to introduce the Generation €uro Students’ Award, which
aims to familiarise students with macroeconomic concepts and monetary policymaking.
This is the first time that the Eurosystem, comprising the European Central Bank
(ECB) and the national central banks of the euro area, has organised such a competition,
which will be launched simultaneously in the euro area countries.
The initiative gives the “euro generation” – the first generation to have grown up with
the euro – an opportunity to learn about the key part that monetary policy plays in the
single currency and in price stability. In its policy-making, the ECB’s Governing Council
focuses on keeping prices stable for the 332 million fellow citizens in the euro area
today. We believe that the competition will offer students an insight into the workings
of the economy and the role of the ECB and the Eurosystem.
As a teacher, you will make an essential contribution to the competition. We are relying on you to guide your students
through the competition rounds and help them understand monetary policy-making. This will require some preparation,
so we have put together the necessary information for this task. You can find it in this booklet or on the competition website,
www.generationeuro.eu.
I hope that you and your students will enjoy participating in the competition and I wish you the best of luck. The ECB
Executive Board is looking forward to meeting you at the European award event in Frankfurt am Main.
1 September 2011, Frankfurt am Main
Schedule 12
Contacts at the ECB 12
2 3

Generation €uro
Students’ Award
1. Teachers
2. Rounds
Objective
Your role
Round 1: online quiz
The Generation €uro Students’ Award aims to help secondary
school students understand monetary policy and how
it relates to the economy as a whole. They will gain an insight
into the role of a central bank by learning about the function
of monetary policy instruments, in particular interest rate
decisions, and by using some of the data available to the
Governing Council of the European Central Bank (ECB)
each month. The competition should also raise students’
awareness of the Eurosystem and deepen their knowledge
of the world of finance.
Overview
The competition consists of three rounds and will end with
a European award event at the ECB in Frankfurt am Main.
Participants
The competition is aimed at students aged 16 to 19 who live
in a euro area country. Their ages may vary slightly from
country to country (depending on the national education
system), but they should be in their final years of secondary
education. All students are entitled to take part, irrespective
of what they are studying.
Students will be required to form teams of five and to
nominate a teacher to accompany them. Each team should
come from the same school, with the teachers and students
themselves deciding on membership. Each team should
also nominate one of its members as team leader. The
teacher should work at the school taking part in the
competition and teach at least one member of the team.
The composition of the team should not be changed
during the competition unless extraordinary circumstances,
such as illness, prevent this.
Rounds
Round 1. Online quiz: the quiz consists of three levels –
beginners, intermediate and expert – with a total of
30 questions. Students must answer the questions as a
team. The teams with the best scores will be invited to
participate in the second round (essay round).
Round 2. Essay: in this round, teachers have to actively
coach their students. Each team will be asked to assess the
economic conditions in the euro area and the inflation
outlook on the basis of some of the data available to the
Governing Council of the ECB. Teams should make an
assessment and then decide on the level at which to set
the key interest rate. They will need to explain their
decision in an essay of no more than 2,000 words. The
essays must be uploaded to the Generation €uro website
(www.generationeuro.eu).
Round 3. Presentation: in this round, five of the best
teams from the essay round will be invited to give a
presentation on their interest rate decision to a jury of
experts, who will then choose the winning team. In both the
essay and the presentation, the interest rate decision should
reflect the economic circumstances at that time, i.e. it should
be a real-time decision.
Your main task is to be the team coordinator, teaching
and guiding your students through each round of the
competition, in particular the essay round, in order to ensure
their work is consistent and of a good standard. If your team
is successful, you should also accompany them to the ECB
for the final presentation round.
Resources
You will have access to a number of resources to guide
and support your students through each round of the
competition. Your main resources will be:
■■
the teacher’s booklet (the very document you are
reading now), which sets out the rules and organisational
procedures for the competition;
■■
the teachers’ day, held at the ECB, where you can learn
more about the organisational procedures and ask any
questions you may have. You will also be given the
information you require to guide your students
through the competition. The event is for all teachers
participating in the competition;
■■
the Generation €uro website www.generationeuro.eu,
which provides all competition-related information and
materials to make it easier for you to teach the core
concepts of monetary policy-making;
■■
materials from the ECB, such as press clippings, reports,
etc.
If students are taking the quiz in order to enter the
competition, they must first register to ensure that their
scores are saved. After registering, they can only do the quiz
once. The quiz consists of 30 questions: ten easy questions,
ten harder ones and ten difficult ones. The 30 questions will
be selected at random from a pool each time a student
starts the quiz. Quiz scores, as well as the electronic
certificates, can also be shared via social networking tools.
The teams with the best scores can proceed to the next
round and will be asked to register for that round. When
doing so, they will be required to enter a name for their team
and supply the names and e-mail addresses of all the team
members (including the accompanying teacher), as well as
the name of the school that they are representing.
Round 2: essay
Once teams of five students and their accompanying
teachers have been registered, they will be sent some
general information on the essay that they will be asked to
write. It will refer to the economic and monetary data used
as a basis for setting the interest rate and explain the
students’ task. This information will also be available on the
Generation €uro website.
In the essay, the teams must clearly state their interest rate
decision, as well as how they came to that decision, based
on their assessment of the key economic indicators
available, the economic and monetary conditions in the
euro area and the inflation outlook. The teams should refer
to the website for all the information they need for their task.
The length of the essay must not exceed 2,000 words. The
essay may be marked down if it is longer. All team members
must be involved in writing the essay, which should reflect
the opinion of the majority of the team.
Teams must upload their essays to the Generation €uro
website. The essays will be assessed by a jury of ECB experts,
who will then select teams to proceed to the next round.
Those teams will be notified accordingly by the ECB.
4
5

3. Composition of
the jury
6. European
award event
Round 3: presentation
The teams that make it through to the third round of the
competition will be asked to present a new interest rate
decision to a jury of ECB experts. The presentation will take
place at the ECB. The ECB will reimburse the travel and
accommodation costs of the teams and accompanying
teachers.
The presentations must not exceed 20 minutes. Teams that
overrun will be marked down by the jury. The presentation
should examine the current economic conditions in the
euro area, provide an assessment of the economic and
inflation outlook, and explain the team’s interest rate
decision and relevant economic arguments.
Teams are encouraged to be creative in the presentations
they give (e.g. using MS PowerPoint) and all team members
(except the teacher) should be equally involved in the
presentation. Teams should also provide the jury with a hard
copy of their presentation to make it easier for the jury
members to take notes while listening.
Question and answer session
After each team has given their presentation, there will
be a question and answer session for a maximum of 20
minutes. It will enable the jury to test the team’s
understanding and knowledge of monetary policy and to
see how they justify their interest rate decision. It will in fact
simulate the monthly press conferences that follow the
meeting of the Governing Council of the ECB, when the
ECB’s President explains the monetary policy decision
(interest rate decision). Team members may be asked to
clarify/expand on points made during their presentation or
to discuss the workings of the economy and how their
interest rate decision will fulfil the Eurosystem’s mandate of
achieving price stability; in that respect, the Governing
Council aims to maintain inflation rates at levels below, but
close to, 2% over the medium term. The final interest rate
decision does not have to be unanimous, but the various
viewpoints must be explained if opinions differ. Teams may
also be asked about major events in the real world that may
have affected the economy.
Team members may confer with each other, but not with
the accompanying teacher. However, the more time they
spend conferring with each other, the less time the jury will
have to ask questions, which could influence their final
assessment. As far as possible, all members of the team
should take part in the question and answer session.
Once all the presentations and question and answer
sessions have been completed, the jury will retire to decide
on the winning team. The jury’s decision will be final and will
be announced in the presence of all of the participating
teams. All students who have participated in the
presentation round will receive a certificate.
The jury appointed to assess the essays and presentations
will comprise several ECB experts.
4. Assessment
criteria
The jury will assess the essays on the basis of:
■■
the accuracy of the proposed interest rate decision;
■■
the reasons for that decision;
■■
familiarity with, and accurate use of, expressions
and terms related to monetary policy.
The jury will assess the presentations on the basis of:
■■
the accuracy of the proposed interest rate decision;
■■
the reasons for that decision;
■■
familiarity with, and accurate use of, expressions and
terms related to monetary policy;
■■
the structure of the presentation;
■■
oral presentation skills;
■■
the level of participation among team members;
■■
the method used to give the presentation.
5. Prizes
The winning teams will receive their prizes at the final and/
or European award event.
The winning team from each country, as well as the winning
team from the international and European schools, will be
invited (except in cases of force majeure) to participate in
the European award event at the ECB in Frankfurt am Main.
This will be a two-day event that will include a training
session on monetary policy, a forum for two or three groups
of students and an award ceremony for the winning teams.
The teams will also have the opportunity to meet the
President of the ECB. The aim of this event is to give students
an insight into the work of the ECB. The ECB will reimburse
all team members and accompanying teachers participating
in the European award event for their travel and
accommodation costs.
7. Privacy
statement
In order to enter the online quiz and the competition itself,
students and teachers must provide personal data on the
Generation €uro website 1 .
By entering these data, participants agree to the publication
of the name of the winning team, as well as of the names
and photographs of the team members, on the ECB’s and on
the respective NCB’s website and/or to the announcement
of the said names at public events. The winning teams will
probably be photographed and/or filmed at the national
and/or European award event and the resulting photos/
videos may be published on the internet or in other media.
The rules on data protection will be applied and interpreted
in accordance with German law.
1
The personal data processed by the ECB is accessible by data subjects in accordance with Regulation (EC) No 45/2001 of the European Parliament and
of the Council of 18 December 2000 on the protection of individuals with regard to the processing of personal data by the Community institutions and
bodies and on the free movement of such data. The time-limit for storing relevant data is 15 years starting from the day of submission. The data can be
accessed by data subjects according to the modalities aimed at respecting the rights of individuals concerned. For all related queries, please write
to info@ecb.europa.eu. Data subjects have the right to have recourse to the European Data Protection Supervisor. By submitting their personal data,
participants are giving their consent for the processing thereof by the ECB.
6
7

Annex
INtroduction to
central banking
and monetary policy
within the Euro area
This annex 2 provides a brief overview of the European
System of Central Banks (ESCB), the Eurosystem and an
introduction to the monetary policy of the ECB. More
detailed information to help you prepare your students for
the competition is available in the section entitled “About
the Eurosystem” on the Generation €uro website.
The European System of Central Banks,
the Eurosystem and the euro area
Since 1 January 1999 the ECB has been responsible for
conducting monetary policy for the euro area – the world’s
largest economy after the United States. The euro area
consists of the 17 countries in the European Union that use
the euro. It came into being when responsibility for
monetary policy was transferred from the national central
banks of the (then) 11 countries to the Governing Council
of the European Central Bank (ECB) in January 1999. Greece
joined in 2001, Slovenia in 2007, Cyprus and Malta in 2008,
Slovakia in 2009 and Estonia in 2011. The launch of the
euro area and the creation of the ECB were milestones in
the ongoing process of European integration. To join the
euro area, all 17 countries had to fulfil the convergence
criteria, as will other EU Member States prior to adopting
the euro. The criteria set out the economic and legal
preconditions for countries to participate successfully in
Economic and Monetary Union.
The legal basis for the single monetary policy is the Treaty
on the Functioning of the European Union and the Statute
of the European System of Central Banks (ESCB) and of the
European Central Bank. The ECB was established as the
core of the Eurosystem and the ESCB. The ECB and the
national central banks (NCBs) together perform the tasks
that they have been assigned.
The ESCB comprises the ECB and the NCBs of all EU Member
States, irrespective of whether they have adopted the euro
or not. The Eurosystem comprises the ECB and the NCBs of
those EU Member States whose currency is the euro.
The Eurosystem and the ESCB will coexist for as long as there
are EU Member States outside the euro area.
European Central Bank
The ECB is the central bank for Europe’s single currency,
the euro.
Objectives
According to the Treaty, the main objective of the ESCB
is to maintain price stability. Without prejudice to this
objective, the ESCB should support the general economic
policies in the EU, such as full employment and sustainable
development.
The objective of monetary policy
according to the Treaty
The Treaty establishes a clear hierarchy of objectives for the
Eurosystem, assigning overriding importance to price
stability. It also makes clear that ensuring price stability is the
most important contribution that monetary policy can
make to achieving a favourable economic environment and
full employment.
These Treaty provisions reflect the broad consensus that the
benefits of price stability are substantial. Maintaining stable
prices on a sustained basis is a crucial precondition for
increasing economic welfare and the growth potential of an
economy; the natural role of monetary policy in an economy
is to maintain price stability. Monetary policy can affect real
economic activity in the shorter term, but ultimately can
only influence the price level in an economy.
The Treaty provisions also imply that, in the actual
implementation of monetary policy decisions aimed at
maintaining price stability, the Eurosystem should also take
into account the broader economic goals of the EU. In
particular, given that monetary policy can affect real activity
in the shorter term, the ECB typically should avoid generating
excessive fluctuations in output and employment if this is in
line with the pursuit of its primary objective.
Basic tasks
According to the Treaty the basic tasks to be carried out
through the ESCB are:
■■
to define and implement the monetary policy of the
Union;
■■
to conduct foreign-exchange operations;
■■
to hold and manage the official foreign reserves of the
euro area countries;
■■
to promote the smooth operation of payment systems.
Further ESCB tasks
The ESCB is also responsible for a number of additional tasks
in the following fields.
■■
Banknotes: the ECB and the NCBs are responsible for
issuing euro banknotes in the Eurosystem.
■■
Statistics: in cooperation with the NCBs, the ECB collects
the statistical information it needs to fulfil its tasks, either
from national authorities or directly from economic
agents.
■■
Financial stability and supervision: the ESCB contributes
to the smooth conduct of policies pursued by the
relevant authorities in matters relating to the prudential
supervision of credit institutions and the stability of the
financial system.
■■
International and European cooperation: the ECB
maintains working relations with relevant institutions,
bodies and forums both within the EU and
internationally in respect of tasks assigned to the ESCB.
The ECB’s Governing Council
The Governing Council is the main decision-making body of
the ECB. It consists of:
■■
the six members of the Executive Board;
■■
the governors of the NCBs of those Member States
whose currency is the euro.
Its responsibilities include:
■■
adopting the regulations and taking the decisions
necessary to ensure the performance of the tasks
assigned to the ESCB;
■■
formulating monetary policy for the euro area. This
includes taking decisions relating to monetary
objectives, key interest rates and the supply of reserves
in the Eurosystem, and establishing guidelines for the
implementation of those decisions.
Meetings and decisions of the ECB’s
Governing Council
The Governing Council usually meets twice a month at the
Eurotower in Frankfurt am Main, Germany. At its first meeting
of each month, the Governing Council assesses economic
and monetary developments and takes its monthly
monetary policy decision. At its second meeting, it mainly
discusses issues related to the other tasks and responsibilities
of the ECB and the Eurosystem.
Although the minutes of the meetings are not published,
the monetary policy decision is explained in detail at a press
conference held shortly after the first meeting of each
month. The President, assisted by the Vice-President, chairs
the press conference, which is divided into two parts:
the President first reads out the Introductory Statement,
which provides the rationale for the monetary policy
decision taken by the Governing Council and then answers
the journalists’ questions.
2
This chapter is based on information available on the ECB’s website
(www.ecb.europa.eu).
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9

The objective
of price stability
The objective of price stability refers to the general level of
prices in the economy and implies avoiding prolonged
periods of both inflation and deflation.
The ECB defines its price stability objective as “a year-on-year
increase in the Harmonised Index of Consumer Prices (HICP)
for the euro area of below, but close to, 2% over the medium
term”.
Price stability contributes to achieving high levels of
economic activity and employment by:
■■
improving the transparency of the price mechanism. In
an environment of stable prices, it is easier for people to
recognise changes in relative prices (i.e. prices between
different goods), instead of being confused by
widespread changes in the general price level when
inflation is high. Consequently, they are able to make
well-informed consumption and investment decisions
and to allocate resources, i.e. their money, more
efficiently;
■■
reducing inflation risk premia in interest rates (i.e. the
“compensation” that investors demand for any
unexpected rise in inflation during the period of their
investment). This reduces real interest rates and boosts
incentives to invest;
■■
rendering unnecessary unproductive activities aimed
at hedging against the negative impact of inflation or
deflation, e.g. holding on to goods in the expectation
that their price may increase;
■■
reducing distortions of inflation or deflation, which can
exacerbate the distortionary impact on the economic
behaviour of tax and social security systems;
■■
preventing an arbitrary redistribution of wealth and
income as a result of unexpected periods of inflation or
deflation.
The role of the Eurosystem’s
monetary policy strategy
A monetary policy strategy is a coherent and structured
description of how monetary policy decisions are made in
order to achieve the objective of a central bank. The monetary
policy strategy for the euro area has two important tasks to
fulfil. First, by imposing a clear structure on the policy-making
process itself, it ensures that the ECB’s Governing Council has
at its disposal the necessary information and analyses
required to take monetary policy decisions. Second, it is a
vehicle for explaining such decisions to the public. By
contributing to the effectiveness of monetary policy, and by
signalling the Eurosystem’s commitment to price stability,
the strategy contributes to the credibility of the Eurosystem
in the financial markets.
By setting short-term interest rates, the monetary policy
decisions of the ECB’s Governing Council have an influence
on the economy and ultimately the price level.
Two-pillar approach
Basis for the interest rate decision
The ECB’s Governing Council has a specific approach to
determining the nature and extent of the risks to price
stability in the euro area over the medium term. This
approach to organising, evaluating and cross-checking the
information relevant for assessing the risks to price stability
is based on two complementary analytical perspectives,
referred to as the two “pillars”:
■■
the economic analysis,
■■
the monetary analysis.
The economic analysis is an assessment of the short to
medium-term influences on price developments, with a
focus on real activity (i.e. the production of goods and
services) and financial conditions in the economy.
It takes account of the fact that price developments over
those horizons are influenced largely by the interplay of
supply and demand in the goods, services and factor markets
(e.g. factors of production such as labour, capital and land).
The monetary analysis focuses on the longer term, and draws
on the long-run link between money and prices. It serves
mainly as a means of cross-checking, from a medium to
long-term perspective, the short to medium-term indications
for monetary policy stemming from the economic analysis.
The two-pillar approach is designed to ensure that no
relevant information is overlooked in the assessment of risks
to price stability and that sufficient attention is paid to
different perspectives and the cross-checking of information
in order to come to an overall judgement on the risks to price
stability. It represents a diversified analysis and ensures robust
decision-making.
Monetary policy instruments
Monetary policy operates by steering short-term interest
rates, thereby influencing economic developments in the
best possible way. The steering of short-term interest rates
is carried out through the operational implementation of
monetary policy. To this end, the Eurosystem has at its
disposal a set of monetary policy instruments, namely open
market operations, standing facilities and minimum reserves.
A: Open market operations
The most important monetary policy instrument is the open
market operation, which serves to:
■■
steer interest rates;
■■
manage the liquidity situation in the money market;
■■
signal the monetary policy stance.
Open market operations can be divided into the following
four categories:
■■
main refinancing operations, which are regular liquidityproviding
reverse transactions with a weekly frequency
and a maturity of one week;
■■
longer-term refinancing operations, which are liquidityproviding
reverse transactions with a monthly frequency
and a maturity of three months;
■■
fine-tuning operations, which are executed on an ad hoc
basis and are aimed at managing the liquidity situation
in the market and steering interest rates, in particular
to smooth the effects on interest rates of unexpected
fluctuations in market liquidity;
■■
structural operations, which are carried out through the
issuance of debt certificates, reverse transactions and
outright transactions.
B: Standing facilities
The Eurosystem also offers standing facilities, which aim
to provide and absorb overnight liquidity and set the
boundaries for overnight market interest rates:
The two standing facilities are:
■■
the marginal lending facility, which allows counterparties
(i.e. financial institutions such as banks) to obtain
overnight liquidity from the euro area national central
banks against eligible assets;
■■
the deposit facility, which can be used by counterparties
to make overnight deposits with the euro area national
central banks.
C: Minimum reserves
Finally, the Eurosystem requires credit institutions to hold
minimum reserves on accounts with the euro area national
central banks. The purpose of the minimum reserve system
is to stabilise money market interest rates and to create or
enlarge a structural liquidity shortage.
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11

Schedule
The competition will take place during 2011/2012 as follows*:
■■
Round 1 – online quiz: 1 October to 30 November 2011
■■
Round 2 – essay (predicting the March 2012 interest
rate decision of the Governing Council): 1 December 2011 to
29 February 2012
■■
Essay assessment: 1 March to 15 April 2012
■■
Round 3 – presentation (predicting the June 2012
interest rate decision of the Governing Council):
15 April to 6 June 2012
■■
European award event at the ECB: June 2012
Contacts at the ECB
ECB staff members will be more than happy to help you with
any questions you may have in the course of the competition.
Please write to: generationeuro@ecb.int.
* These dates are subject to change.