Hans Gersbach, 06 October 2021

Since the financial crisis of 2007/08, bank equity regulation has been tightened. This is one reason why broad money supply reacted only weakly to the enormous expansion of the monetary base. With the publication of a new CEPR Policy Insight, this updated column from February 2021 argues that the process of tightening bank equity regulation has come to an end and will not have the same disinflationary effects after the pandemic. The large reserve balances held by banks may become a greater concern and pose larger inflation risks in the years to come. 

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