Last month, the US Federal Reserve announced a new quantitative easing programme, in which it will inject money into the economy by buying up to $600 billion in long-term government bonds. This column argues that now is not the time to be buying back long-term debt. Given exceptionally low long-term rates, the US government should be issuing it instead.
John Cochrane, 07 December 2010
Lucia Dalla Pellegrina, Donato Masciandaro, Rosaria Pansini, 12 September 2010
The global crisis has led policymakers in the EU and the US to broaden their central banks' mandates to include greater banking supervision. This column argues that this new responsibility should be seen as an evolution of the central bank specialisation as a monetary agent rather than a reversal of the specialisation trend.
Stephen Cecchetti, Benjamin Cohen, 20 August 2010
The extent of the damage from the global crisis has forced policymakers to rethink how they regulate finance. This column first examines the long-term impact of stronger capital and liquidity requirements and then estimates the transitional economic impact as the new standards are phased in. It argues that, while such reforms may come at a short-term cost, the benefits of a stronger and healthier financial system will be around for years to come.
Francesco Giavazzi, Alberto Giovannini, 19 July 2010
Should the crisis spur central banks to change how they conduct monetary policy? This column argues that strict inflation targeting, which ignores financial fragility, can produce interest rates that push the economy into a “low-interest-rate trap” and increase the likelihood of a financial crisis.
Enrico Perotti, 05 July 2010
This column argues that government measures to restore confidence in the financial system have achieved a “pause in the panic”, but this is not enough. Governments still need to reverse the dramatic slide of the financial system towards unstable funding – a trend that holds a gun to the heads of governments and central banks.
Hans Gersbach, 01 February 2010
Should monetary policy and banking regulation be conducted by separate bodies? This column proposes a new policy framework whereby the central bank chooses short-term interest rates and the aggregate equity ratio while banking regulation and supervision, including the determination of bank-specific capital requirements, would be left to separate bank-regulatory authorities.
Pierre-Olivier Weill, Guillaume Rocheteau, Ricardo Lagos, 16 December 2009
Following the last run on a British bank over 130 years ago, Walter Bagehot argued that central banks should act as a lender of last resort. While such policies have been followed by central banks in today’s crisis, this column updates the recommendation by suggesting central banks should also act as a “liquidity provider of last resort”.
Sylvester Eijffinger, 24 October 2009
Governments are restructuring their financial supervision systems. This column warns that the proposed new structure for European financial supervision is poorly coordinated and will not help in a systemic crisis. It discusses how the ECB might coordinate macro-prudential supervision in the euro area.
Luis Jácome HG., 20 October 2009
Latin American central banks seem to have weathered the global crisis quite well. This column describes their policy responses and says they succeeded in lowering inflation, averting banking crises, and shortening the recession. It attributes their success to past reforms that created strong institutional foundations and effective policy frameworks.
Raphael Auer, Sébastien Kraenzlin, 14 October 2009
The world’s major central banks used underpublicised swap agreement to address mismatches in their currency-specific liquidity needs during the crisis. This column says these measures where highly effective and came at a very low cost.
Dirk Bezemer, 30 September 2009
Did economists not see this crisis coming? This column says that analysts who used models featuring a distinct financial sector issued fairly detailed, well reasoned, and public warnings of imminent finance turmoil. It argues that mainstream models missed the crisis because they use a “reflective finance” view in which financial variables are wholly determined by the real sector. “Flow of funds” models may be the way forward for anticipating finance-induced recessions.
Scott Sumner, 10 September 2009
Do most macroeconomists hold views of this crisis that are entirely at variance with modern monetary economics? This column says that tight monetary policy caused the crisis. Economists seem not to believe what they teach about the fallacy of identifying tight money with high interest rates and easy money with low interest rates.
Daniel Gros, Felix Roth, 10 September 2009
Most observers agree that central banks can claim partial credit for the stabilisation that have been achieved and the prospect of a recovery. This column warns that the general public seems to hold a completely different opinion; trust in central banks has declined and the reaction of central banks to the crisis is generally judged as unsatisfactory. Central bankers all over the world should redouble their efforts to regain the trust of the people towards their institution.
The Editors, 17 July 2009
The latest CEPR/ICMB Geneva Report on the World Economy examines two key challenges facing central banks in the aftermath of the financial crisis: removing the current substantial fiscal stimulus; and enhancing their monetary policy frameworks.
César Molinas, 01 April 2009
Deflation risks are more related to very low inter-temporal discount rates than to falling prices. This column argues that long-term pre-emptive action should be channelled through taxation rather than central banks.
Francesco Mongelli, Dieter Gerdesmeier, Barbara Roffia, 07 February 2009
This column systematically compares the US Federal Reserve System, the Eurozone central banking system, and the Bank of Japan’s institutional structures and monetary policy frameworks.
Luis Jácome HG., 03 January 2009
As the global economic crisis goes south, developing countries' central banks must cope with financial turmoil. Recent experience in Latin America, this column argues, cautions against pouring money into the financial system. Countries that relied on prompt corrective actions managed crises well, while those relying on central bank money suffered greater instability.
Xavier Freixas, Bruno Parigi, 22 December 2008
This column argues that the financial crisis of 2007 and 2008 redefines the functions of the lender of last resort, placing it at the intersection of monetary policy, supervision and regulation of the banking industry, and the organisation of the interbank market.
Jesper Lindé, Lars E.O. Svensson, Stefan Laséen, Malin Adolfson, 16 September 2008
Over the last couple of years, central banks have started to build and estimate dynamic stochastic general equilibrium models. In this column, Lars Svensson, Deputy Governor of Sweden’s central bank, and coauthors discuss what needs to be taken into account when using such models for policy analysis and forecasting.
Carin van der Cruijsen, Sylvester Eijffinger, Lex Hoogduin, 12 August 2008
Transparency is the new trend in central banking, but it has both costs and benefits. This column discusses research aimed at identifying the optimal level of transparency. The results suggest that US and European central banks may be too transparent.