The global crisis inaugurated a new era for central banks in the advanced economies, when their conventional role as interest rate-setters and lenders and market makers of last resort expanded. Central banks have become the custodians of stability for financial markets – a role for which they lack both democratic accountability and political legitimacy, argues Willem Buiter in DP8780. He decries the new “perverse division of labour” between central banks and fiscal authorities and appeals for a reassessment of this pathological arrangement.
Willem Buiter, Monday, January 16, 2012 - 00:00
Kateřina Šmídková, Jan Zapal, Roman Horváth, Sunday, November 13, 2011 - 00:00
Does the publishing of voting records improve the transparency of monetary policy? This column argues voting records indeed contain informative power about future monetary policy but only if there is sufficient independence in voting across board members and if the signals about the optimal policy rate are noisy.
Marcus Miller, John Driffill, Tuesday, September 27, 2011 - 00:00
Just what on earth is going on in the global economy? Rather than get caught up in the hysteria, this column says the answers are best found by looking through the pages of history and dusting down some old textbooks.
Mark Mink, Wednesday, August 31, 2011 - 00:00
While central bank liquidity support is used on a large scale to combat the instability of the banking sector, this column argues that the prospect of receiving such support might well have been one of the causes of the instability. In particular, it shows that the provision of liquidity support stimulates banks to engage in various forms of risk-taking, and to do so in a procyclical way.
Clemens Jobst, Tuesday, July 19, 2011 - 00:00
The debate over TARGET balances and whether there is an ongoing stealth bailout in the Eurozone has attracted attention from top economists and journalists in the past month. This column argues that the reason why the arguments keep dragging on is the lack of a clear framework for the discussion, something this column aims to provide.
Axel Leijonhufvud, Tuesday, January 25, 2011 - 00:00
The shell game is a roadside con as old as civilisation. This column argues that the same swindle is being performed on a massive scale at the expense of the unsuspecting taxpayer. It says that, with their near zero interest rates, central banks are effectively subsidising the banking sector – with barely a pea passed on to the public.
Max Bruche, Javier Suarez, Friday, January 7, 2011 - 00:00
During the global crisis central banks have undertaken unconventional measures that some commentators claim go beyond their mandate. This column focuses on central banks intervening in the money markets as a middle man. It argues that such actions can be welfare improving, but are unlikely to be fiscally neutral, thus raising questions about whether they should be left to a central bank.
John H Cochrane, Tuesday, December 7, 2010 - 00:00
Last month, the US Federal Reserve announced a new quantitative easing programme, in which it will inject money into the economy by buying up to $600 billion in long-term government bonds. This column argues that now is not the time to be buying back long-term debt. Given exceptionally low long-term rates, the US government should be <i>issuing</i> it instead.
Lucia Dalla Pellegrina, Donato Masciandaro, Rosaria Vega Pansini, Sunday, September 12, 2010 - 00:00
The global crisis has led policymakers in the EU and the US to broaden their central banks' mandates to include greater banking supervision. This column argues that this new responsibility should be seen as an evolution of the central bank specialisation as a monetary agent rather than a reversal of the specialisation trend.
Stephen Cecchetti, Benjamin H Cohen, Friday, August 20, 2010 - 00:00
The extent of the damage from the global crisis has forced policymakers to rethink how they regulate finance. This column first examines the long-term impact of stronger capital and liquidity requirements and then estimates the transitional economic impact as the new standards are phased in. It argues that, while such reforms may come at a short-term cost, the benefits of a stronger and healthier financial system will be around for years to come.
Francesco Giavazzi, Alberto Giovannini, Monday, July 19, 2010 - 00:00
Should the crisis spur central banks to change how they conduct monetary policy? This column argues that strict inflation targeting, which ignores financial fragility, can produce interest rates that push the economy into a “low-interest-rate trap” and increase the likelihood of a financial crisis.
Enrico Perotti, Monday, July 5, 2010 - 00:00
This column argues that government measures to restore confidence in the financial system have achieved a “pause in the panic”, but this is not enough. Governments still need to reverse the dramatic slide of the financial system towards unstable funding – a trend that holds a gun to the heads of governments and central banks.
Hans Gersbach, Monday, February 1, 2010 - 00:00
Should monetary policy and banking regulation be conducted by separate bodies? This column proposes a new policy framework whereby the central bank chooses short-term interest rates and the aggregate equity ratio while banking regulation and supervision, including the determination of bank-specific capital requirements, would be left to separate bank-regulatory authorities.
Pierre-Olivier Weill, Guillaume Rocheteau, Ricardo Lagos, Wednesday, December 16, 2009 - 00:00
Following the last run on a British bank over 130 years ago, Walter Bagehot argued that central banks should act as a lender of last resort. While such policies have been followed by central banks in today’s crisis, this column updates the recommendation by suggesting central banks should also act as a “liquidity provider of last resort”.
Sylvester Eijffinger, Saturday, October 24, 2009 - 00:00
Governments are restructuring their financial supervision systems. This column warns that the proposed new structure for European financial supervision is poorly coordinated and will not help in a systemic crisis. It discusses how the ECB might coordinate macro-prudential supervision in the euro area.
Luis I. Jácome H., Tuesday, October 20, 2009 - 00:00
Latin American central banks seem to have weathered the global crisis quite well. This column describes their policy responses and says they succeeded in lowering inflation, averting banking crises, and shortening the recession. It attributes their success to past reforms that created strong institutional foundations and effective policy frameworks.
Raphael Auer, Sébastien Kraenzlin, Wednesday, October 14, 2009 - 00:00
The world’s major central banks used underpublicised swap agreement to address mismatches in their currency-specific liquidity needs during the crisis. This column says these measures where highly effective and came at a very low cost.
Dirk Bezemer, Wednesday, September 30, 2009 - 00:00
Did economists not see this crisis coming? This column says that analysts who used models featuring a distinct financial sector issued fairly detailed, well reasoned, and public warnings of imminent finance turmoil. It argues that mainstream models missed the crisis because they use a “reflective finance” view in which financial variables are wholly determined by the real sector. “Flow of funds” models may be the way forward for anticipating finance-induced recessions.
Scott Sumner, Thursday, September 10, 2009 - 00:00
Do most macroeconomists hold views of this crisis that are entirely at variance with modern monetary economics? This column says that tight monetary policy caused the crisis. Economists seem not to believe what they teach about the fallacy of identifying tight money with high interest rates and easy money with low interest rates.
Daniel Gros, Felix Roth, Thursday, September 10, 2009 - 00:00
Most observers agree that central banks can claim partial credit for the stabilisation that have been achieved and the prospect of a recovery. This column warns that the general public seems to hold a completely different opinion; trust in central banks has declined and the reaction of central banks to the crisis is generally judged as unsatisfactory. Central bankers all over the world should redouble their efforts to regain the trust of the people towards their institution.