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. The name comes from the London base of Overend, Gurney and Company who in 1866 were the subject of the last run on a British bank before Northern Rock in 2007.

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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. However, the objectives of the central bank should then be clearly defined from the outset, the bank should be accountable for its actions, and the public should have a solid trust in its actions. The ongoing crisis may well have made central banking more complicated.

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Topics:  EU institutions

Tags:  ECB, Central Banks, 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. 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

URL

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

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