Daniel Gros, 12 June 2017

Exiting from unconventional monetary policies is now a key issue for central banks, and especially for the US Federal Reserve. This column argues that the Fed already began this exit some time ago, and that the relevant part of its balance sheet has already shrunk by about one quarter of GDP. Pursuing the current policy of reinvesting would lead to a full exit within ten years.

Federico Cingano, Francesco Manaresi, Enrico Sette, 24 June 2016

Negative shocks to bank balance sheets are problematic not just for financial markets, but for employment and economic growth more widely. This column uses evidence on a bank liquidity shock in Italy in 2007-10 to show the impact on firms’ production, investment, and employment. Firms borrowing from banks with a high exposure to the shock experienced a more intense fall both in credit flows and in investment expenditure. While the credit cut has been homogeneous across borrowers, firms with easier access to external finance were able to contain the negative consequences of the drop in credit for investment.

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