Sense and nonsense in the quantitative easing debate

John H Cochrane, 7 December 2010

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In November, the Fed started its new “quantitative easing programme”. The Fed will buy up to $600 billion in long-term government bonds, putting $600 billion of extra money in the economy. Defenders think this is the key to reducing unemployment and breaking the economy out of its doldrums.

Topics: Monetary policy
Tags: Central Banks, monetary policy, US

Governments, central bankers, and banking supervision reforms: Does independence matter?

Lucia Dalla Pellegrina, Donato Masciandaro, Rosaria Vega Pansini, 12 September 2010

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In response to the global crisis, many countries are implementing – or at least considering – reforms concerning the role of the central bank in banking supervisory regimes.

Topics: Global governance, Monetary policy
Tags: Central Banks, financial regulation, global governance, monetary policy

Strengthening the financial system: The benefits outweigh the costs

Stephen Cecchetti, Benjamin H Cohen, 20 August 2010

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Just like an overweight victim recovering from a severe heart attack, the financial system must change its ways. After working tirelessly – and in the end successfully – to stabilise the patient, the world’s central bankers and supervisors are developing a rigorous diet and exercise programme to help avoid a relapse.

Topics: Financial markets, Global crisis
Tags: Central Banks, financial regulation, global crisis

The low-interest-rate trap

Francesco Giavazzi, Alberto Giovannini, 19 July 2010

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There is a fundamental flaw in the way central banks set official interest rates. This flaw has created what might be called the “low-interest-rate trap”. Low rates induce excessive risk taking, which increases the probability of crises, which in turn, requires low interest rates to keep the financial system alive.

Topics: Global crisis, Monetary policy
Tags: Central Banks, global crisis, inflation targeting, interest rates, monetary policy

We must escape the grip of short-term funding

Enrico Perotti, 5 July 2010

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Last week, the banks won but financial stability lost. Heavy lobbying undermined G20 support for proposals by the Basel Committee to plug a major gap in banking regulation. Measures such as “liquidity buffers” were challenged.

Topics: Financial markets
Tags: Central Banks, financial regulation, Short-term bank funding

Double targeting for Central Banks with two instruments: Interest rates and aggregate bank equity

Hans Gersbach, 1 February 2010

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The current crisis has placed a fundamental question at the centre of policy discussion: “Should monetary policy and banking regulation be conducted separately?” Opinions differ – see Adrian and Shin (2009), Goodhart (2008), and De Larosière et al. (2009).

Topics: Monetary policy
Tags: Central Banks, equity ratio, financial regulation

Liquidity in the financial crisis: New insights on the lender of last resort

Pierre-Olivier Weill, Guillaume Rocheteau, Ricardo Lagos, 16 December 2009

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Under every central banker’s bed is a copy of “Lombard Street” by Walter Bagehot. Published in 1873, it argues that the central bank should act as a lender of last resort during crises to ensure that financial intermediaries have the resources to provide liquidity in asset markets.

Topics: Monetary policy
Tags: Central Banks, Federal Reserve, global crisis, ponetary policy

Adjustments to the accountability and transparency of the European Central Bank

Sylvester Eijffinger, 24 October 2009

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It is widely agreed that central banking should not be subject to "political business cycles". Consequently, in the last decades, it has become an integral part of modern central banking policy that full operational (or functional) independence of central banks is a welfare-enhancing quality.

Topics: EU institutions
Tags: Central Banks, ECB, financial supervision

The global crisis and central banks in Latin America: Breaking with the past

Luis I. Jácome H., 20 October 2009

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Latin America has a history of recurrent financial crises that took a large toll on economic growth and fuelled social unrest. Frequently, these crises were triggered by exogenous shocks, which unveiled macroeconomic and/or financial weaknesses, leading to simultaneous banking and currency crises.

Topics: Macroeconomic policy
Tags: banking crises, Central Banks, global crisis

Money market tensions and international liquidity provision during the crisis

Raphael Auer, Sébastien Kraenzlin, 14 October 2009

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The recent crisis has triggered a wide spectrum of policy responses, including many policies that were unthinkable two years ago. One of these unthinkable policies was the decision of the world's major central banks to engage in reciprocal swap agreements, which involve a central bank handing out liquidity denominated in foreign currencies to its counterparties.

Topics: International finance
Tags: Central Banks, currency markets, swap

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