Here is a puzzle. Almost everything we have learned from recent research in monetary history, theory, and policy points to the Federal Reserve as the cause of the crash of late 2008. More specifically, an extremely tight monetary policy in the US (and perhaps Europe and Japan) seems to have sharply depressed nominal spending after July 2008.
Misdiagnosing the crisis: The real problem was not real, it was nominal
Scott Sumner, 10 September 2009
The crisis and citizens’ trust in central banks
Daniel Gros, Felix Roth, 10 September 2009
Central banks seem to be enjoying a “good crisis”. They have lowered interest rates to near zero and used unconventional approaches to stabilise financial systems.
Are the Golden Years of Central Banking Over? The Crisis and the Challenges
The Editors, 17 July 2009
César Molinas, 1 April 2009
In principle, there is nothing wrong with falling prices. As the argument goes, excess supply brings about lower prices, higher real money balances, lower interest rates and higher aggregate spending.
The Fed, the Eurosystem, and the Bank of Japan: More similarities or differences?
Francesco Paolo Mongelli, Dieter Gerdesmeier , Barbara Roffia, 7 February 2009
Central banks have always been important players in financial markets. They set key interest rates, which are at the origination of the monetary transmission process, they are monopoly suppliers of base money, and they perform a number of other tasks and functions.
Central banks and financial crises: Lessons from recent Latin American history
Luis I. Jácome H., 3 January 2009
Central banks have played an instrumental role in the current financial crisis in mature markets.
The lender of last resort of the 21st century
Xavier Freixas, Bruno M. Parigi, 22 December 2008
Since the creation of the first central banks in the 19th century, the existence of a lender of last resort (LOLR) has been a key issue for the structure of the banking industry. Banks finance opaque assets with a long maturity with short-lived liabilities – a combination that is vulnerable to sudden loss of confidence.
Can optimal policy projections in DSGE models be useful for policymakers?
Jesper Lindé, Lars E.O. Svensson, Stefan Laséen, Malin Adolfson, 16 September 2008
Over the last couple of years many central banks, for instance the ECB, the Federal Reserve Board, and Sveriges Riksbank, have started to build and estimate dynamic stochastic general equilibrium (DSGE) models, following the work by Christiano, Eichenbaum, and Evans (2005), and Smets and Wouters (2003).
Optimal central bank transparency
Carin van der Cruijsen, Sylvester Eijffinger, Lex Hoogduin , 12 August 2008
In recent decades, both monetary theory and monetary policymakers have come to emphasise the importance of expectations for the transmission of monetary policy.1 The New Keynesian model – more particularly the Phillips curve embedded in it – explains current inflation by the output gap and expected future inflation.
Central bank independence and transparency: Not just cheap talk (Part 2)
Christopher Crowe, Ellen E. Meade, 31 July 2008
Using the updated measures of central bank independence and transparency that we detailed in our first column, we sought to investigate what effects these aspects of central bank governance might have on economic performance.1
- The case for 4% inflationBall
- Helicopter money as a policy optionReichlin, Turner, Woodford
- The banking crisis as a giant carry trade gone wrongAcharya, Steffen
- Everything the IMF wanted to know about financial regulation and wasn’t afraid to askBair
- Rethinking macroeconomic policy: Getting granularBlanchard, Dell'Ariccia, Mauro
- A tale of two depressions: What do the new data tell us? February 2010 updateEichengreen, O’Rourke
- Educated in America: College graduates and high school dropoutsHeckman, LaFontaine
- Eurozone breakup would trigger the mother of all financial crisesEichengreen
- Panic-driven austerity in the Eurozone and its implicationsDe Grauwe, Ji
- Debt, deleveraging, and the liquidity trap: A new modelKrugman
Baldwin, Kawai, Wignaraja, 11 June 2013
Giavazzi, Portes, Weder di Mauro, Wyplosz
Reichlin, Turner, Woodford
CEPR Policy Research
- The "Greatest" Carry Trade Ever? Understanding Eurozone Bank RisksAcharya, Steffen
- Political Credit Cycles: The Case of the Euro ZoneFernández-Villaverde, Garicano, Santos
- Winning by Losing: Incentive Incompatibility in Multiple QualifiersDagaev, Sonin
- Income and schoolingBrückner, Gradstein
- Monetary Policy and Rational Asset Price BubblesGalí
- How the EZ crisis is permanently changing EU institutionsMicossi
- WTO 2.0: Global governance of supply-chain tradeBaldwin
- Is US economic growth over? Faltering innovation confronts the six headwindsGordon
- The economic crisis: How to stimulate economies without increasing public debtWood
- Austerity: Too Much of a Good Thing?Corsetti
- Understanding banks in emerging markets5 - 6 September 2013 / EBRD, London / European Bank for Reconstruction and Development (EBRD) and Tilburg University