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.
Dirk Bezemer, 30 September 2009
Scott Sumner, 10 September 2009
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, 10 September 2009
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.
The Editors, 17 July 2009
The latest CEPR/ICMB Geneva Report on the World Economy examines two key challenges facing central banks in the aftermath of the financial crisis: removing the current substantial fiscal stimulus; and enhancing their monetary policy frameworks.
César Molinas, 01 April 2009
Deflation risks are more related to very low inter-temporal discount rates than to falling prices. This column argues that long-term pre-emptive action should be channelled through taxation rather than central banks.
Francesco Paolo Mongelli, Dieter Gerdesmeier , Barbara Roffia, 07 February 2009
This column systematically compares the US Federal Reserve System, the Eurozone central banking system, and the Bank of Japan’s institutional structures and monetary policy frameworks.
Luis I. Jácome H., 03 January 2009
As the global economic crisis goes south, developing countries' central banks must cope with financial turmoil. Recent experience in Latin America, this column argues, cautions against pouring money into the financial system. Countries that relied on prompt corrective actions managed crises well, while those relying on central bank money suffered greater instability.
Xavier Freixas, Bruno M. Parigi, 22 December 2008
This column argues that the financial crisis of 2007 and 2008 redefines the functions of the lender of last resort, placing it at the intersection of monetary policy, supervision and regulation of the banking industry, and the organisation of the interbank market.
Jesper Lindé, Lars E.O. Svensson, Stefan Laséen, Malin Adolfson, 16 September 2008
Over the last couple of years, central banks have started to build and estimate dynamic stochastic general equilibrium models. In this column, Lars Svensson, Deputy Governor of Sweden’s central bank, and coauthors discuss what needs to be taken into account when using such models for policy analysis and forecasting.
Carin van der Cruijsen, Sylvester Eijffinger, Lex Hoogduin , 12 August 2008
Transparency is the new trend in central banking, but it has both costs and benefits. This column discusses research aimed at identifying the optimal level of transparency. The results suggest that US and European central banks may be too transparent.
Christopher Crowe, Ellen E. Meade, 31 July 2008
Theories arguing that independent, transparent central banks fight inflation better are widely accepted, but the evidence backing them is surprisingly scarce. This column presents new empirical estimates suggesting a payoff to central bank independence and transparency.
Christopher Crowe, Ellen E. Meade, 27 July 2008
The European Central Bank is under fire from Nicholas Sarkozy. This column introduces a new set of measures of central bank independence and transparency, which shows that the ECB is markedly more transparent than the Eurozone members’ central banks were in the 1990s.
Willem Buiter, 18 July 2008
Willem Buiter talks to Romesh Vaitilingam about the financial crisis, the global cyclical slowdown and the rise of inflation. He discusses central banks’ responses to the credit crunch and calls on them to tighten monetary policy to counter the inflationary threat.
Ellen E. Meade, David Stasavage, 26 June 2008
Central banks are increasingly transparent but is the spotlight is stifling? Analysis of FOMC transcripts before and after Committee members knew that they would be published shows how transparency deadened the debate and reduced the number of challenges to Greenspan’s position.
Charles A.E. Goodhart, 24 June 2008
Central banks cannot achieve price and financial stability with one instrument (interest rates). A counter-cyclical regulatory system is needed to dampen asset booms and to smooth busting bubbles. To use such macro-prudential instruments effectively, regulators need courage, quantitative triggers, and independence; they will be criticised by lenders, borrowers and politicians in both booms and busts.
Guido Tabellini, 23 June 2008
The ECB and the Fed are pursuing very different policies on inflation fighting and the use of monetary aggregates in guiding policy. One of Italy’s leading economists argues that either the ECB or the Fed is making a mistake.
Camille Cornand, Frank Heinemann, 27 May 2008
Central banks and international institutions often call for greater transparency in financial markets. This column argues, however, that in a context where central banks make inevitable forecast errors, it is efficient for central banks to disseminate information to only a limited audience.
Willem Buiter, 17 May 2008
In CEPR Policy Insight No.24, Willem Buiter asks: Does it matter if a central bank suffers a large capital loss? Can the central bank become insolvent? How and by whom should the central bank be recapitalised, should its capital be deemed insufficient?
Richard Baldwin, 08 May 2010
This column, first posted 17 May 2008, reviews Willem Buiter's analysis of why the ECB is so hesitant to buy debt. Central banks can go broke – and some in developing countries have done so recently. The ECB is now lending against dubious collateral. An ECB recapitalisation seems unthinkable at the moment, but that’s why it is a good time to think the unthinkable. Willem Buiter considers the question at length in CEPR Policy Insight No. 24 and argues that Eurozone fiscal authorities should, ASAP, agree on a formula for fiscal burden-sharing should an ECB recapitalisation ever be necessary.
Alan S. Blinder, Michael Ehrmann, Marcel Fratzscher, Jakob de Haan, David-Jan Jansen, 15 May 2008
Central banking has undergone dramatic change in recent decades, and many banks now favour transparency in communicating their policies and forecasts. What does this mean? This column argues that our understanding of the role of central bank communication is still in its infancy and it remains unclear what constitutes an optimal communication strategy for central banks.