ECB Succession: Where Do the Potential Candidates Stand on Key Issues?
ResearchAI-Based Analysis of ZEW Mannheim Classifies Monetary Policy Stance of Potential Successors to Lagarde
What will be the stance of Christine Lagarde’s successor as the new president of the ECB? A recent study by ZEW Mannheim uses AI-assisted analysis of public speeches to examine the monetary policy stance of potential candidates, focusing on Pablo Hernández de Cos, Klaas Knot, Joachim Nagel and Isabel Schnabel. The results show that all four adopted a rather ‘hawkish’ stance in the inflationary environment of the years 2022 to 2024 but differ in their determination to combat inflation and in the evolution of their views over time.
“Although our analysis indicates a consensus among the positions during the months of the sharp rise in inflation, it reveals differences over the years. In her speeches since the turn of the year 2021/2022, Isabel Schnabel has consistently signalled a high degree of caution regarding new inflation risks. Hernández de Cos, on the other hand, has moved away from this line more quickly and was always a particularly strong advocate of an expansionary monetary policy, also before the surge in inflation,” explains Professor Friedrich Heinemann, head of ZEW Research Unit “Corporate Taxation and Public Finance”. Jan Kemper, researcher in the same research unit, adds: “Our analysis shows that AI-powered text analysis can make a relevant contribution to monetary policy research today.”
Clearly different views on monetary policy
A comparison of speeches from 2022 to 2024 reveals clear differences: Schnabel and Nagel are particularly vocal advocates of fighting inflation; De Cos and Knot appear less resolute. Over the entire period under review, a more nuanced picture emerges. De Cos tends to favour a more expansionary monetary policy, whereas Schnabel has advocated a more restrictive stance, particularly since early 2022. Knot and Nagel fall somewhere in between and seem to signal a continuation of the ECB’s current course.
With the sharp rise in inflation from 2021 onwards, all four economists have adopted a ‘hawkish’ tone. This refers to a more restrictive stance on the part of the ECB, aimed at combating inflation through interest rate hikes and tighter monetary policy. This change of course was particularly pronounced and sustained in the case of Schnabel. De Cos and Knot have toned down their restrictive rhetoric since 2023, as did Nagel more recently.
About the methodology
Methodologically, the analysis is based on an AI-assisted text analysis of speeches delivered between 2018 and 2024. The classification is on a scale from -1 (strongly ‘dovish’) to +1 (strongly ‘hawkish’). The speech data are drawn from the database of the Bank for International Settlements (BIS). The study utilises modern language models capable of reliably deriving monetary policy stances from texts.
