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.
Xavier Freixas, Bruno M. Parigi, Monday, December 22, 2008
Jesper Lindé, Lars E.O. Svensson, Stefan Laséen, Malin Adolfson, Tuesday, September 16, 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 , Tuesday, August 12, 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, Thursday, July 31, 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, Sunday, July 27, 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, Friday, July 18, 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, Thursday, June 26, 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, Tuesday, June 24, 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, Monday, June 23, 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, Tuesday, May 27, 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, Saturday, May 17, 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, Saturday, May 8, 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, Thursday, May 15, 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.
Luigi Spaventa, Wednesday, May 7, 2008
A prolonged situation of financial distress, which has now lasted for almost a year, is debilitating the financial system. In CEPR Policy Insight 22, Luigi Spaventa examines possible solutions to the immediate and urgent problems.
Luigi Spaventa, Thursday, May 8, 2008
The global financial system may be caught in a downward spiral as market and funding illiquidity reinforce each other. The author of CEPR Policy Insight 22 presents a radical proposal that would break the feedback loop by not valuing illiquid assets at market prices under crisis conditions.
Javier Suarez, Thursday, March 27, 2008
In a new CEPR Policy Insight, Javier Suarez proposes the creation of an Emergency Bank Debt Insurance Mechanism as an alternative to the massive lending of last resort operations undertaken by central banks since the start of the subprime crisis.
Xavier Vives, Monday, March 31, 2008
The current crisis is a modern form of a traditional banking crisis. The 125-year-old Bagehot's doctrine tells us how governments should react – lend to solvent but illiquid financial institutions. While easy to state, the doctrine is hard to apply. The key question to assess the future consequences of current central bank policy is whether the subprime mortgage crisis arises in the context of a moderate or a severe underlying moral hazard problem.
Tommaso Monacelli, Thursday, March 20, 2008
Inflation is rising. This column identifies three sources of inflation and argues that it is very important for central banks to tame inflation now, before we face a vicious cycle of rising inflation and expected inflation.
Katrin Assenmacher-Wesche, Stefan Gerlach, Wednesday, March 12, 2008
Many observers have argued that central banks should use monetary policy to prevent the rise of asset price bubbles. Recent research shows that monetary policy is too costly and too slow to serve such a role.
Stephen Cecchetti, Monday, December 3, 2007
The final essay examines whether central bank actions have created moral hazard, encouraging asset managers to take on more risk than is in society’s interest; the answer is “no”.