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. Financial crises, thus, became a primary source of macroeconomic instability and a reason for social frustration, as vast groups of the population, in particular the poorest, often lost their jobs, real income, and savings.

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Topics:  Macroeconomic policy

Tags:  Central Banks, banking crises, 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.

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Topics:  International finance

Tags:  Central Banks, currency markets, swap

'No one saw this coming' – or did they?

Dirk Bezemer 30 September 2009

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From the very beginning of the credit crisis and the ensuing recession, it has become conventional wisdom that "no one saw this coming". Anatole Kaletsky (2008) wrote in the The Times of “those who failed to foresee the gravity of this crisis - a group that includes Mr King, Mr Brown, Alistair Darling, Alan Greenspan and almost every leading economist and financier in the world.” Glenn Stevens (2008), Governor of the Reserve Bank of Australia, said:

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Topics:  Global crisis Macroeconomic policy

Tags:  Central Banks, global crisis, flow of funds

Misdiagnosing the crisis: The real problem was not real, it was nominal

Scott Sumner 10 September 2009

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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. And yet it is difficult to find economists who believe this. More surprisingly, few economists are even aware that their views conflict with the standard model, circa 2009.

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Topics:  Macroeconomic policy

Tags:  interest rates, monetary policy, Central Banks

The crisis and citizens’ trust in central banks

Daniel Gros, Felix Roth 10 September 2009

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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. Most observers agree that central banks can at least claim partial credit for the stabilisation that now seems to have been achieved and the prospect of a recovery that now seems tangible (see for example Gerlach et al., 2009 and Cecchetti, 2008).

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Topics:  Macroeconomic policy

Tags:  Central Banks, trust

Are the Golden Years of Central Banking Over? The Crisis and the Challenges

The Editors,

Date Published

Fri, 07/17/2009

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Global crisis Monetary policy

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http://www.cepr.org/pubs/books/CEPR/booklist.asp?cvno=P193
Tags
Central Banks, global financial crisis

Preventing deflation

César Molinas 01 April 2009

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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 demand curve shifts to the right (responding to the previous shift of the supply curve) and a new equilibrium is reached at a higher level of output and (if the money supply does not grow enough) a lower price level. In order to get persistent deflation from a fall in prices, something has to go wrong in the causal chain.

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Topics:  Macroeconomic policy

Tags:  Central Banks, Gamma discounting, inheritance tax

The Fed, the Eurosystem, and the Bank of Japan: More similarities or differences?

Francesco Paolo Mongelli, Dieter Gerdesmeier , Barbara Roffia 07 February 2009

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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 can better perform their mission and fulfil their goals when they are understood by the public and other policy makers. One of the youngest members of the central banking community is the Eurosystem (a supranational central banking system).

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Topics:  Monetary policy

Tags:  Central Banks, monetary policy frameworks

Central banks and financial crises: Lessons from recent Latin American history

Luis I. Jácome H. 03 January 2009

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Central banks have played an instrumental role in the current financial crisis in mature markets. With the aim of bringing money markets back to normal functioning and stemming financial turmoil, central banks have extended sizable financial assistance to failing banks and other intermediaries – although at the cost of increasing the size of their balance sheets and creating moral hazard and other microeconomic distortions.

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Topics:  Monetary policy

Tags:  Latin America, Central Banks, financial crisis, banking crises

The lender of last resort of the 21st century

Xavier Freixas, Bruno M. Parigi 22 December 2008

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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. To avoid avoidable disasters when confidence evaporates, the classical view (Thornton 1802 and Bagehot 1873) is that the central bank should lend to illiquid but solvent banks, at a penalty rate, and against collateral deemed to be good under normal times.

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Topics:  International finance

Tags:  Central Banks, lender of last resort, systemic crises

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