Central Banks in Times of Crisis: The FED vs. the ECB. CEPS Policy Brief No. 276, 11 July 2012 (original) (raw)
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Central banks and crisis management
As 2007 began, historians prepared to reflect on several anniversaries of financial turmoil. It had been 10 years since the East Asian crisis, 20 years since the Black Monday stock market crash, 100 years since the Panic of 1907, and 150 years since the Hamburg financial crisis of 1857. Not many, however, could have predicted that 2007 would write its own chapter in history with the subprime mortgage meltdown.
Central banks and financial crises
Paper presented at the Federal Reserve Bank of Kansas City' s symposium on Maintaining Stability in a Changing Financial System, Jackson Hole, Wyoming, 21-23 Aug., 2008., 2008
The paper draws lessons from the experience of the past year for the conduct of central banks in the pursuit of macroeconomic and financial stability. Macroeconomic stability is defined as either price stability or as price stability and sustainable output or employment growth. Financial stability refers to (1) the absence of asset price bubbles, (2) the prevention or mitigation of systemically significant funding illiquidity and market illiquidity and (3) the prevention of insolvency of systemically important financial institutions. The performance of the Fed, the ECB and the Bank of England is evaluated in terms of these criteria. The Fed is judged to have done worst both as regards macroeconomic stability and as regards one of the two time dimensions of financial stability: minimizing the likelihood and severity of future financial crises. As regards ‘putting out fires’ (dealing with the immediate crisis), the Bank of England gets the wooden spoon for its early failure to perform the lender of last resort and market maker of last resort roles.
The Crisis Management of the ECB
Financial and Monetary Policy Studies, 2016
A sequence of crises-the global financial crisis in 2008, the "Great Recession" in 2009 and the subsequent Euro crisis-constituted a major challenge for policy makers. After the fiscal policy had used up its powder in fighting the 2009 recession, monetary policy remained the only expansionary player in the policy arena. The ECB reacted to the crises with applying conventional (interest rate) and unconventional (qualitative easing) measures, however, with a considerable delay to the US Fed. The interest (main refinancing operation) rate was set to zero in September 2014 (the Fed already in December 2008) and the proper QE programme started not until March 2015 (the Fed shortly after the Lehman brothers crash). In evaluating the crisis management of the ECB one must state a clear failure in reaching its own medium term inflation target of 2 percent. However, it was successful in bringing down interest rates for government bonds after Draghi's famous "whatever it takes" speech in July 2012 and the following announcement of the outright monetary transactions programme. Whether ECB's QE programme 2015-2017 will be successful in reaching its primary goal, namely regaining the inflation target of 2 percent is an open question. Simulations with the Global Economic Model of Oxford Economics indicate that it will be able to reach the inflation goal but only with a considerable lag. The impact on the real economy will not be as large as QE experiments in the USA. Other unintended effects-e.g., the creation of bubbles on the stock markets-are larger than the intended effects. In contrast to the usual dynamic stochastic general equilibrium exercises our simulations of ECB's QE with the global economic model can not only quantify the effects for the Euro area as a whole but also for its member countries and it can identify the possible spillovers to countries outside the Euro area.
A Tale of Three Crises: Synergies between ECB Tasks
Social Science Research Network, 2022
This paper should not be reported as representing the views of the European Central Bank (ECB). The views expressed are those of the authors and do not necessarily reflect those of the ECB.
Role Of the european Central Bank in Combating The financial Crisis in The european Union
Polish Review of International and European Law
This work presents the European Central Bank’s role in eliminating economic crisis in the European Union. It contains roots and course of the financial slowdown in the eurozone. The Authors show competences of the institution before and its functions during the crisis. Finally, there was made an attempt to evaluate the effectiveness of the ECB monetary policy.
The Romanian Journal of Economics, 2013
Thinking of what a global currency could be or represent - an idea on which the authors have strong public opinions - the question of the central banks’ role and conduct during the last crisis has become not only complex but a changing one. As regards this latest process, we feel that we separate from something rational we have been used to, and it seems we undergo, as professionals, a hardly acceptable conversion.