The so-called “Draghi moment” is in a sense another name for the “announcement effect” that John Hicks, a winner of the 1972 Nobel Prize in Economic Sciences, talked about. The announcement effect refers to a situation where a policy announcement itself is enough to change people’s minds and cause an immediate shift in expectations, even though no concrete measures are in place, because people believe the policy will make a difference.
Mario Draghi, described by Nobel laureate Paul Krugman as arguably “the greatest central banker of modern times,” is the current prime minister of Italy and former president of the European Central Bank (ECB). When he took office as president of the ECB in November 2011, Europe was mired in a debt crisis and the eurozone was on the verge of collapse. In July 2012, when the whole world was pessimistic about the survival of the eurozone, Draghi declared that the ECB is ready to do “whatever it takes” to preserve the euro. This had a profound impact on boosting market confidence and thus saved the euro. The “whatever it takes” catchphrase became famous along with Draghi himself, and the moment that instantly changed the confidence of the market became known as the “Draghi moment.”
