Central banks and financial crises
AbstractThe 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 âputting out firesâ (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.
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Bibliographic InfoArticle provided by Federal Reserve Bank of Kansas City in its journal Proceedings - Economic Policy Symposium - Jackson Hole.
Volume (Year): (2008)
Issue (Month): ()
Other versions of this item:
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
- G - Financial Economics
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