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”.
Stephen Cecchetti, Monday, December 3, 2007
Stephen Cecchetti, Friday, November 30, 2007
The third essay in this 4-part series argues that central banks should have a direct role in financial supervision.
Paul De Grauwe, Wednesday, November 14, 2007
Inflation targeting proponents view central banks’ responsibilities as minimalist. But the subprime crisis shows that central banks cannot avoid taking responsibilities that include the prevention of bubbles and the supervision of all institutions that are in the business of creating credit and liquidity.
Willem Buiter, Anne Sibert, Monday, August 13, 2007
Last week's actions by the ECB, the Fed and the Bank of Japan were not particularly helpful – a classic example of trying to manage a credit crisis or liquidity squeeze using the tools suited to monetary policy-making in orderly markets. Monetary policy is easy; preventing or overcoming a financial crisis is hard; managing the exit from a credit squeeze without laying the foundations for the next credit and liquidity explosion is harder still. Central bankers should earn their keep by acting as market makers of last resort.