scholarly journals Changes in Central Bank Procedures During the Subprime Crisis and Their Repercussions on Monetary Theory

2010 ◽  
Author(s):  
Marc Lavoie
Keyword(s):  
Central Bank ◽  
Monetary Theory ◽  
Subprime Crisis

Monetary Theory: Overview and Liquidity Extensions

2016 ◽  
Author(s):  
Guillermo Calvo
Keyword(s):  
Financial Crisis ◽  
Central Bank ◽  
Price Level ◽  
Central Banks ◽  
Linear Constraints ◽  
Relative Price ◽  
Monetary Theory ◽  
Quantitative Easing ◽  
Liquidity Shock ◽  
New Crop

The chapter points out some deficiencies of the mainstream model utilized by many central banks. It also reviews the Fiscal Theory of the Price level. Extending the barebones version of the central banks' model presented here to the case in which "land" is endowed with liquidity, the chapter shows, among other things, that if land is subject to Liquidity Crunch, increasing the supply of liquidity by pump-priming high-powered money fails to send land's relative price back to pre-liquidity-shock level. This helps to give a rationale for Quantitative Easing in which the central bank purchases "toxic assets" with high-powered money. The chapter includes extensions to account for banks and liquidity as a factor of production, and it ends with a critique of the new crop of financial crisis models, especially those stressing non-linear constraints.

Effects of Central Bank Intervention on the Interbank Market During the Subprime Crisis

2010 ◽  
Vol 24 (6) ◽  
pp. 2053-2083 ◽  
Author(s):  
Celso Brunetti ◽  
Mario di Filippo ◽  
Jeffrey H. Harris
Keyword(s):  
Central Bank ◽  
Subprime Crisis ◽  
Interbank Market ◽  
Central Bank Intervention

scholarly journals Gravity Among Central Bank Balance Sheets: Monetary Policy Spill-Over on FX Volatility

2020 ◽  
Vol 5 (1) ◽  
pp. 33-57
Author(s):  
Gábor Dávid Kiss ◽  
Mercédesz Mészáros
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Relative Size ◽  
Reducing Power ◽  
Central Banks ◽  
Gravity Models ◽  
Quantitative Easing ◽  
Subprime Crisis ◽  
European Central ◽  
Bank Balance Sheets

AbstractFollowing the subprime crisis, most of the European central banks implemented several unconventional monetary instruments. As a result of the late quantitative easing, there was a shift from stimulating lending to the immediate stimulation of the securities market in the monetary policy of the European Central Bank (ECB) and of the smaller central banks, too. These securities purchase programs, first and second-market transactions, and asset purchases have led to an increase in the stock of securities held by the central banks, whose spill-over effects have not been fully explored yet. The aim of our research is to identify the spill-over effects of the central banks’ unconventional instruments and quantitative easing on currency volatility while considering the relative size of the issuing central bank and the situation of small open economies. By running an adapted version of gravity models, we analyzed a sample of six European central banks and the ECB. Based on our results, the high volatility levels of European currencies around the eurozone have come from their relative smallness and unconventional monetary policy, and considerations about safe havens have a reducing power on F X volatility.

The Economic Consequences of Banking Crises: The Role of Central Banks and Optimal Independence

2021 ◽  
pp. 1-17
Author(s):  
DANIEL HANSEN
Keyword(s):  
Central Bank ◽  
Banking Crises ◽  
Central Banks ◽  
Central Bank Independence ◽  
Economic Consequences ◽  
Monetary Theory ◽  
Economic Distress ◽  
Political Independence ◽  
Policy Mandate

A large literature establishes the benefits of central bank independence, yet very few have shown directly negative economic consequences. Furthermore, while prevailing monetary theory suggests CBI should enhance management of economic distress, I argue that independent central banks exhibit tepid responsiveness to banking instability due to a myopic focus on inflation. I show that banking crises produce larger unemployment shocks and credit and stock market contractions when the level of central bank independence is high. Further, I show that these significant economic costs are mitigated when central banks do not have the inflation-centric policy mandates predominantly considered necessary. When the bank has high operational and political independence, banks’ whose policy mandate does not rigidly prioritize inflation produce significantly better outcomes during banking crises. At the same time, I show that this configuration does not produce higher inflation, suggesting it achieves a more flexible design without incurring significant costs.

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