Enhancing the global financial safety net through central-bank cooperation

Edwin M. Truman 10 September 2013

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The prospect that the Federal Reserve will soon ease off on its purchases of long-term assets has increased financial-market uncertainty and contributed to a retrenchment in global capital flows. This turbulence has revived discussion of the need to enhance the global financial safety net –i.e. the set of arrangements to provide international liquidity to countries facing sharp reversals in capital inflows despite following sound economic and financial policies.1

The dominant lessons from the financial crises of the past decade are:

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Topics:  Global crisis International finance

Tags:  Central Banks, liquidity, banking, debt

Political challenges of the macroprudential agenda

Jeffrey Chwieroth, Jon Danielsson 06 September 2013

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A key factor in conquering inflation in the 1980s was the doctrine of central-bank independence. Similarly, the success of the macroprudential agenda also has come to depend on an independent central bank with a credible commitment to implement politically unpopular measures. Indeed, one recent IMF study finds that timely macroprudential-policy implementation requires involvement of the central bank (Lim et al. 2013).

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Topics:  Financial markets Politics and economics

Tags:  credibility, Central Banks, macroprudential

Redesigning the ECB with regional rather than national central banks

Michael Burda 15 July 2013

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The monetary union was always a grand gamble. It established the ECB for an immense region that itself was not a state -- a trans-European institution with governmental duties that does not represent any government in particular.

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Topics:  EU institutions Macroeconomic policy

Tags:  ECB, monetary union, Central Banks

Integrating monetary policy and macroprudential regulation

Otaviano Canuto, Matheus Cavallari 21 May 2013

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If the global crisis – and the events that led up to it – have taught us anything, it is that there should be ‘no complacency with asset price booms’. We know first-hand the dire consequences of significant and widespread bubbles, so clearly monetary policymakers can no longer passively observe the evolution of asset prices.

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Topics:  Global crisis Monetary policy

Tags:  Central Banks

Misplaced concerns about central-bank independence

Marco Annunziata 12 February 2013

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Concerns are rising that central-bank independence is at risk, already curtailed by governments eager to control all other levers of growth. The Japanese government’s none-too-subtle strong-arming of the Bank of Japan is one of the most blatant examples (e.g. King 2013).

But the current debate on the risks to central-bank independence misses the point.

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Topics:  Institutions and economics Monetary policy

Tags:  ECB, Fed, Central Banks, Federal Reserve, fiscal policy, independence

Bank capital requirements: Are they costly?

David Miles 17 January 2013

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There exists a widespread view that having banks use more equity capital (and relatively less debt) to finance the assets they hold creates substantial costs, costs that may be so great as to make more capital infeasible. I believe that these costs are very substantially exaggerated. But the benefits of having banks that are far more robust – in the sense of having a balance sheet structure that makes them much less likely to come near to insolvency once actual and suspected losses on their assets come along – are likely to be large.

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Topics:  Financial markets

Tags:  Central Banks, banking, equity capital, debt capital

To cut or not to cut, that is the (central banks') question: In search of neutral interest rates in Latin America

Nicolas Magud, Evridiki Tsounta 16 January 2013

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An increasing number of Latin American countries have been strengthening their monetary policy frameworks, using the monetary policy rate as their main instrument since the late 1990s. To decide whether to ease or tighten monetary conditions, policymakers typically compare the policy rate to the (short-run) neutral-interest rate – the rate that is consistent with stable inflation (at the central bank’s target) and a closed output gap. However, this rate can be time-varying as it is affected by changes in macroeconomic fundamentals and global interest rates.

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Topics:  Institutions and economics Macroeconomic policy Microeconomic regulation

Tags:  interest rates, Central Banks, Information

True independence for the ECB: Triggering power - no more, no less

Markus K Brunnermeier, Hans Gersbach 20 December 2012

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Governments are hesitating over how to resolve the financial distress of banks, leaving fragile banking structures in place. This problem is particularly pressing in the Eurozone; governments expect the ECB to continue providing cheap funding, undermining the bank’s independence. The ECB is presented with a dilemma; it has to choose between either financial instability if the failure of the respective bank endangers the financial system, or ongoing emergency lending with reduced collateral standards.

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Topics:  EU institutions Europe's nations and regions

Tags:  ECB, Central Banks, banking regulation, Eurozone crisis, banking union

Monetary policy in Latin America: Where are we going?

Christian Daude 10 December 2012

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Inflation targeting has served countries in Latin America well . They have achieved macroeconomic stability by reducing inflation and the pass-through of external shocks such as oil price and exchange rate fluctuations (cf. Mishkin and Schmidt-Hebbel 2007).

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Topics:  Macroeconomic policy Monetary policy

Tags:  inflation targeting, Latin America, Central Banks, foreign exchange, Brazil, Chile, Mexico, Colombia, Peru

Using changes in auction maturity sectors to help identify the impact of QE on gilt yields

Ryan Banerjee, Sebastiano Daros, David Latto, Nick McLaren 20 August 2012

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The policy decisions of several of the world’s largest central banks turn on a tricky empirical judgement – the effect of quantitative easing purchases on government bond yields. In the UK, the empirics have got much harder.

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Topics:  Monetary policy

Tags:  Central Banks, quantitative easing

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