The Zero Lower Bound and Financial Stability: A New Role for Central Banks?

Much has happened in the world of central banking in the past decade. In this paper, I focus on three issues associated with the zero lower bound (ZLB) on short-term nominal interest rates and the nexus between monetary policy and financial stability: 1) whether we are moving toward a permanently lower long-run equilibrium real interest rate; 2) what steps can be taken to mitigate the constraints imposed by the ZLB; and 3) whether and how financial stability considerations should be incorporated in the conduct of monetary policy. These important topics deserve the attention of both academic and government professionals.

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A simple way to overcome the zero lower bound of interest rates for central banks: Evidence from the Fed and the ECB within the financial crisis

International Journal of Monetary Economics and Finance ◽

10.1504/ijmef.2011.040923 ◽

2011 ◽

Vol 4 (3) ◽

pp. 279 ◽

Cited By ~ 8

Author(s):

Jens Klose

Keyword(s):

Financial Crisis ◽

Lower Bound ◽

Interest Rates ◽

Central Banks ◽

Zero Lower Bound

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Exchange rate movements in the presence of the zero lower bound

Banks and Bank Systems ◽

10.21511/bbs.12(1).2017.10 ◽

2017 ◽

Vol 12 (1) ◽

pp. 82-87

Author(s):

Jens Klose

Keyword(s):

Exchange Rate ◽

Lower Bound ◽

Exchange Rates ◽

Interest Rates ◽

Balance Sheet ◽

Central Banks ◽

Zero Lower Bound ◽

Monetary Policies ◽

Base Exchange ◽

Monetary Base

Exchange rates are expected to adjust according to the stance of monetary policies, which are in normal times differences in interest rates set by the central banks. This interest rate parity does, however, no longer hold if central banks approach the zero lower bound on interest rates and switch to measures of quantitative easing. Therefore, the author estimates exchange rate changes based on the different stance of the monetary base, which is an indicator of differing monetary policies in the countries. The results reveal that indeed exchange rates movements in the Dollar-Euro-Rate can be explained by differences in the monetary base, since the zero lower bound has become binding. However, the influence depends crucially on whether the monetary base is increased or decreased and whether the other central bank is also expanding or reducing its balance sheet at the same time. Keywords: monetary base, exchange rate, Fed, ECB. JEL Classification: E52, E58, F42

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Macroprudential Policy Instruments of Central Banks

Voprosy Ekonomiki ◽

10.32609/0042-8736-2012-8-32-47 ◽

2012 ◽

pp. 32-47

Author(s):

S. Andryushin ◽

V. Kuznetsova

Keyword(s):

Systemic Risk ◽

Financial Stability ◽

Financial System ◽

Policy Instruments ◽

Central Banks ◽

Macroprudential Policy ◽

Policy Studies ◽

The Future ◽

Financial Cycles

The paper analyzes central banks macroprudencial policy and its instruments. The issues of their classification, option, design and adjustment are connected with financial stability of overall financial system and its specific institutions. The macroprudencial instruments effectiveness is evaluated from the two points: how they mitigate temporal and intersectoral systemic risk development (market, credit, and operational). The future macroprudentional policy studies directions are noted to identify the instruments, which can be used to limit the financial systemdevelopment procyclicality, mitigate the credit and financial cycles volatility.

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