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Generation €uro Students’ Award T e a c h e r’s b o o k l e t 2 © European Central Bank, 2016-17 Index 1. Introduction –About the competition –Participation –Prizes – What’s in it for the students? –Rules 4 4 4 5 5 5 2. Teachers – Your role –Resources 5 5 5 3.Rounds –Round 1: online quiz – Round 2: assignment – Task – Format – Finalists’ online presentation – Presentation – Preparation – Question and answer session 6 6 6 6 6 6 7 7 7 4.Composition of the jury 7 5.Assessment criteria 7 6.European Award Event 8 7. – – – 8 8 9 Privacy statement i) Data protection and purpose of processing ii) Security and transfer to third parties iii) Time limit and rights of access, correction and deletion Annex: Introduction to central banking and monetary policy in the euro area Schedule Contacts at the ECB 9 9 16 16 3 1. INTRODUCTION About the competition The Generation €uro Students’ Award (G€SA) is an annual competition which 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). The competition should also raise students’ awareness of the Eurosystem and deepen their knowledge of the world of finance. The ECB organises the competition for international and European schools, and national schools abroad (ECB’s competition). The national central banks (NCBs) of the euro area organise the competition for national schools in their respective countries (NCB’s competition). The ECB’s competition consists of two separate rounds – an online quiz and an assignment – and will end with a award event at the ECB in Frankfurt am Main. Participation The competition is for 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. If they wish, they may participate on more than one occasion as long as they are not part of the same team (as in the previous year). Students will need to form teams consisting of four or five members 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. More than one team from the same school may participate. 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 required by extraordinary circumstances, such as illness. Each team and its respective teacher should register for the competition on the Generation €uro website, www. generationeuro.eu. They should first click on “ENTER THE COMPETITION”; and then complete the registration form for the ECB’s competition. 4 2. Teachers Prizes Your role The winning teams (of both the ECB and the national central bank competitions) will be invited to the award event on 5 April 2017 at the ECB in Frankfurt am Main, which will include an award ceremony with President Draghi and the governors of the national central banks, as well as panel debates on topical matters and a sightseeing programme. As a teacher you will play a key role throughout the competition. Your main task is to be the team coordinator, teaching and guiding your students through each round of the competition, in particular the assignment 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 European award event. What’s in it for the students? By participating in this competition, students will deepen their understanding of the economy. They will also have the opportunity to develop core skills, such as analytical and critical thinking, to improve their ability to work as a team, as well as to hone their communication and presentation skills, to meet with senior economists, and to exchange experiences with students from other euro area countries. In addition, the knowledge and skills gained during the competition might benefit their university studies. Rules You will have access to a number of resources to guide and suppor t your students through each round of the competition. Your main resources will be: ■■ this booklet; ■■ 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; ■■ the Generation €uro Facebook page (https://www.facebook. com/GenerationEuro) which provides regular updates on the competition and tips for the different rounds; ■■ the Generation €uro Students’ Award playlist on YouTube to watch presentations delivered by finalists from previous competitions; ■■ the ECB’s website (www.ecb.europa.eu) where you can find the transcripts of the monthly press conferences, the Economic Bulletin, the latest reports, statistics, etc. © European Central Bank The rules and organisational procedures for the competition are set out in this booklet, and in the “Terms and Conditions” and the “Privacy Statement” published on the Generation €uro website. Resources 5 3. Rounds Round 1: online quiz Format Before taking the quiz to enter the competition, students must first register to ensure that their scores are saved. After registering, they can only do the quiz once. Students are expected to answer the questions as a team. The quiz consists of 30 questions: ten easy questions, ten of medium difficulty and ten more demanding ones. The 30 questions will be selected at random from a pool each time a student starts the quiz. At the end of the quiz, all participating teams will receive an electronic certificate showing their scores. The teams with the best scores and the fastest completion times will be invited to register for the assignment round. Students will have to prepare presentations in a format of their choosing and may make use of any kind of tools or platforms, e.g. attractive PowerPoint slide decks with compelling narratives and visuals presentation slides (max. 30 slides), short texts, infographics, social media, videos or any other form of presentation. It is recommended that students practice using the trial quiz several times prior to registering for the competition and taking the real quiz. The trial quiz can be found on the Generation €uro website: 1) by clicking on “Quiz” or “Try the quiz” if the competition is running; or 2) by clicking on “Take the trial version of the quiz” if the competition is over. The trial quiz can be taken at any time throughout the year. Round 2: assignment Task In the assignment, the teams are required to: 1. propose a monetary policy decision of the Governing Council; and 2. explain their decision to a target group not familiar with central banking, e.g. fellow students or the general public. Explanations should be based on their assessment of the key economic indicators available, economic and monetary conditions in the euro area, and the inflation outlook. Further information will be published on the Generation €uro website prior to the start of the assignment round. 6 Students may make use of any sources (ECB website and other material, traditional media, social media, etc.), but sources of information must be quoted. Originality will be rewarded, and copying and pasting should be avoided. All team members are expected to participate in the writing of the assignment. The output should ideally reflect the opinion of the majority of the team. Teachers are required to actively coach and advise their students. Teams must upload their assignments to the Generation €uro website so that they can be accessed – and assessed anonymously – by a jury of ECB experts. The jury will choose the five best assignments. The ECB will notify the five finalist teams, who will be invited to present their proposals in front of the jury of ECB experts via a digital interface. Additional information on the students’ task can be found on the Generation €uro website. Finalists’ online presentation The task of the five finalist teams invited to give an online presentation consists of two parts: Presentation The teams are required to: 1. summarise the monetary policy decision proposed in the assignment; and 2. explain this decision to a target group not familiar with central banking, e.g. fellow students or the general public, as required in the assignment. Presentations by the finalists, which will take place via a digital interface, should be submitted in a format that is communication friendly. They must not exceed 20 minutes in length and all team members (except the teacher) should be equally involved. The online presentations will take place in March 2017 (exact date tbc). Fur ther information on technical requirements will be provided closer to the start of the online presentation round. Preparation Additional information on the preparation of the presentation round can be found on the Generation €uro website. 4. Composition of the jury The assignment and online presentations will be assessed by a jury composed of staff from the ECB. 5. Assessment criteria The jury will assess the assignments on the basis of: ■■ familiarity with, and accurate use of, expressions and terms related to monetary policy and non-standard monetary policy measures; ■■ the students’ creativity and own research. The jury will assess the online presentations on the basis of: ■■ familiarity with, and accurate use of, expressions and terms related to monetary policy and non-standard monetary policy measures; ■■ the structure of the presentation; ■■ oral presentation skills; ■■ the level of participation among team members; ■■ the method used to give the presentation. After each team has given their presentation, there will be a question and answer session for a maximum of 20 minutes. This part is as important as the presentation itself. The jury will test the teams’ understanding and knowledge of monetary policy. Teams may also be asked about current events that may be having an effect on the economy. Team members may confer with each other, but not with the accompanying teacher. As far as possible, all members of the team should take part in the question and answer session. © European Central Bank Question and answer session 7 6. EUROPEAN AWARD EVENT 7. Privacy statement The winning team from each country (participating in the relevant euro area NCB’s competition), as well as the winning team from the international and European schools and national schools abroad (participating in the ECB’s competition), will be invited (except in cases of force majeure) to participate in the European award event at the ECB in Frankfurt am Main. Any personal data the students and teachers provide will be processed in accordance with the Data Protection Regulation2. The Outreach Division of the ECB will collect and handle the personal data as the data controller. The data processor which hosts the Generation €uro website and processes the data on the website under instruction from and on behalf of the ECB is Havas Worldwide Düsseldorf GmbH (Euro RSCG GmbH). The award event will include an award ceremony with President Draghi and the national central bank governors, as well as panel debates on topical matters and a sightseeing programme. © European Central Bank The ECB will reimburse all team members and accompanying teachers participating in the European award event for their travel and accommodation costs. 8 i) Data protection and purpose of processing All the participants’ data provided in the registration form on the Generation €uro website will be put into a database. The data collected will be used to manage participation in the competition, to access competition-related information, to rank the participants, to award the prizes and to contact and provide the participants with any relevant information. Only the personal data provided by registering on the Generation €uro website or by sending an e-mail to [email protected] will be retained. By entering their personal data, the participating students and teachers agree to the publication of the name of the winning team and its members on the websites of the ECB and/or NCBs and/or to its announcement at public events. It is also likely that photographs will be taken and short video recordings of the winning teams will be made on the national award days and at the final award event, and that these will be published by the ECB and/or NCBs. Annex ii) Security and transfer to third parties Personal data collected through the Generation €uro website may be transferred to the NCBs of the euro area Member States to manage, where necessary, the competition at national level. Any further processing of the personal data by the NCBs is subject to the guarantees provided in the national legislation implementing the Data Protection Directive 95/46/EC3. Havas Worldwide Düsseldorf GmbH (Euro RSCG GmbH), as data processor, and the NCBs have agreed to ensure the confidentiality of the personal data and provide adequate protection of privacy. The central banks to which the personal data may be disclosed are: the European Central Bank, Nationale Bank van België/ Banque Nationale de Belgique, Deutsche Bundesbank, Central Bank of Ireland, Bank of Greece, Banco de España, Eesti Pank, Banque de France, Banca d’Italia, Central Bank of Cyprus, Latvijas Banka, Lietuvos bankas, Banque centrale du Luxembourg, Bank Ċentrali ta’ Malta/Central Bank of Malta, De Nederlandsche Bank, Oesterreichische Nationalbank, Banco de Portugal, Banka Slovenije, Národná banka Slovenska and Suomen Pankki - Finlands Bank. iii) Time limit and rights of access, correction and deletion The time limit for storing the above-mentioned data is three years, starting from the day when the personal data including a portrait, photograph or video were obtained. The students and teachers have the right to access, correct and update the data about themselves. To make inquiries about the collection and processing of personal data or to exercise the right of access or rectification, a request should be sent to [email protected]. Data subjects have the right to resort to the European Data Protection Supervisor: https://secure.edps.europa.eu/EDPSWEB/. Introduction to central banking and monetary policy in the euro area This annex 4 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 “EDUCATIONAL HUB” on the Generation €uro website. The European System of Central Banks, 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 single-currency economy after the United States. The euro area consists of those 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 ECB in January 1999. Greece joined in 2001, Slovenia in 2007, Cyprus and Malta in 2008, Slovakia in 2009, Estonia in 2011, Latvia in 2014 and Lithuania in 2015. The launch of the euro area and the creation of the ECB were milestones in the process of European integration. To join the euro area, the above 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 in Economic and Monetary Union. egulation (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 R processing of personal data by the Community institutions and bodies and on the free movement of such data. 3 Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing or personal data and on the free movement of such data. 2 9 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 NCBs together perform the tasks that they have been assigned. The ESCB comprises the ECB and the NCBs of all Member States, irrespective of whether they have adopted the euro or not. The Eurosystem comprises the ECB and the NCBs of those Member States whose currency is the euro. The Eurosystem and the ESCB will coexist as long as there are Member States outside the euro area. European Central Bank The ECB is the central bank for Europe’s single currency, the euro. 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 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. According to the Treaty the basic tasks to be carried out by 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. 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. 4 10 This chapter is based on information available on the ECB’s website http://www.ecb.europa.eu 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. Meetings and decisions of the ECB’s Governing Council The Governing Council meetings dedicated to monetary policy are held every six weeks. At these meetings, the Governing Council assesses economic and monetary developments and takes its monetary policy decision. Nonmonetary policy meetings will continue to be held at least once a month. The purpose of these meetings is to mainly discuss issues related to the other tasks and responsibilities of the ECB and the Eurosystem. The meetings usually take place at the ECB in Frankfurt am Main, Germany. The monetary policy decision is explained in detail at a press conference held shortly after each monetary policy meeting. The President together with 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. In addition, the ECB publishes regular accounts of the Governing Council’s monetary policy meetings. The ECB’s Governing Council The objective of price stability The Governing Council is the main decision-making body of the ECB. It consists of: ■■ the six members of the Executive Board, plus ■■ 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. 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: 11 The role of the Eurosystem’s monetary policy strategy ■■ 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, 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. A monetary policy strategy is a coherent and structured framework of how 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 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, and ■■ 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, namely labour, capital and land). 12 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. Furthermore, various financial market indicators complement the information on money and credit developments, thus completing the picture and pointing to any risks stemming from the financial side of the economy. 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. 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 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. 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. 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. 13 C: Minimum reserves 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 create or enlarge a structural liquidity shortage. Non-standard monetary policy measures On account of the depth and length of the financial crisis, it would not have been possible to ensure price stability through standard monetary policy alone. The short-term interest rate was reduced to its effective lower bound, thereby reducing the potential for further rates cuts to support the economy. Indeed, even before the short-term interest rate became constrained in this way, the ECB needed to implement some of its non-standard monetary policy measures to address the serious disruptions in the transmission of its policy caused by the financial fragmentation of the euro area. Additional non-standard monetary policy measures have been introduced to expand the monetary policy stance in order to mitigate disinflationary risks. Overall, the combination of both standard monetary policy and the suite of non-standard monetary policy measures has ensured price stability in the euro area. The aim of the non-standard monetary policy measures introduced by the ECB, which are unprecedented in nature, scope and magnitude, is to fulfil the ECB’s primary objective of safeguarding price stability and to ensure an appropriate monetary policy transmission mechanism. These measures form part of the Eurosystem’s monetary policy implementation “toolbox” but are, by definition, exceptional and temporary in nature. They have been designed to provide liquidity to the banking sector, ease overall financial conditions and restore specific market segments and the bank lending channel. The banking sector is a particularly important channel for transmitting monetary impulses to euro area firms and households. 14 The non-standard monetary policy measures include the following: Liquidity and funding measures ■■ Fixed-rate tender procedure with full allotment ■■ Extension of the maturity of refinancing operations (three-year longer-term refinancing operations (LTROs) in November 2011) ■■ Expansion of the collateral pool Outright purchases in malfunctioning market segments ■■ Securities Markets Programme ■■ Covered bond purchase programmes ■■ Outright Monetary Transactions (September 2012) Forward guidance (July 2013) Credit easing and asset purchases (June 2014 to June 2016) ■■ Targeted longer-term refinancing operations (TLTROs) ■■ Asset-backed securities purchase programme ■■ Covered bond purchase programme ■■ Corporate sector purchase programmew ■■ Expanded asset purchase programme On 22 January 2015 the ECB launched its expanded asset purchase programme. This programme added the purchase of sovereign bonds to the ECB’s existing private sector asset purchase programmes that had been launched towards the end of 2014 as a tool to help the ECB achieve its price stability mandate. The monthly asset purchases of €80 billion are intended to continue until the end of March 2017, or beyond if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim. 15 Schedule Contacts at the ECB The competition will take place IN 2015-16 as follows*: ECB staff members will be pleased to help you with any questions you may have in the course of the competition. Please write to: [email protected] ■■ Round 1 (online quiz): 5 October to 18 November 2016 ■■ Round 2 (assignment): 28 November 2016 to 9 February 2017 ■■ Online presentation by finalist teams: March 2017 ■■ European award event at the ECB: 5 April 2017 © European Central Bank/Thorsten Jansen * These dates are subject to change.