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Monetary Policy Implementation during the Crisis in 2007 to 2008

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  • Clemens Jobst

    ()
    (Oesterreichische Nationalbank, Economic Analysis Division)

Abstract

Since the outbreak of turbulence in the financial markets in August 2007, the implementation of monetary policy – typically a peripheral aspect for observers of monetary policy – has attracted increased attention. The heightened attention was accompanied by uncertainty about how to interpret the liquidity measures taken and what to make of the new instruments introduced. This contribution provides the facts needed to properly understand central bank measures by focusing on the euro area and the U.S.A. Essentially, observers need to be aware that today, the main avenue of monetary policy implementation is interest rates rather than monetary aggregates such as the monetary base. Moreover, adjusting the liquidity implementation framework is not necessarily tantamount to changing the monetary policy stance. Finally, the specific institutional frameworks of individual central banks have a bearing on how they implement monetary policy. The contribution concludes with a description of possible techniques for implementing monetary policy under very low interest rates.

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File URL: http://www.oenb.at/dms/oenb/Publikationen/Volkswirtschaft/Monetary-Policy-and-the-Economy/2009/Monetary-Policy-and-the-Economy-Q1-09/chapters/mop_2009_q1_in_focus04_tcm16-111591.pdf
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Bibliographic Info

Article provided by Oesterreichische Nationalbank (Austrian Central Bank) in its journal Monetary Policy & the Economy.

Volume (Year): (2009)
Issue (Month): 1 ()
Pages: 53–77

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Handle: RePEc:onb:oenbmp:y:2009:i:1:b:4

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Related research

Keywords: monetary policy implementation; financial crisis; operating procedures; money market; quantitative easing;

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Cited by:
  1. Martin Handig & Robert Holzfeind & Clemens Jobst, 2012. "Understanding TARGET 2: The Eurosystem’s Euro Payment System from an Economic and Balance Sheet Perspective," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 81–91.
  2. Ansgar Belke & Jens Klose, 2010. "(How) Do the ECB and the Fed React to Financial Market Uncertainty?: The Taylor Rule in Times of Crisis," Discussion Papers of DIW Berlin 972, DIW Berlin, German Institute for Economic Research.
  3. Orlowski, Lucjan T., 2012. "Financial crisis and extreme market risks: Evidence from Europe," Review of Financial Economics, Elsevier, vol. 21(3), pages 120-130.
  4. Hubert Gabrisch & Lucjan T Orlowski, 2011. "Extreme Risks in Financial Markets and Monetary Policies of the Euro-Candidates," Comparative Economic Studies, Palgrave Macmillan, vol. 53(4), pages 511-534, December.

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