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Monetary Policy and Central Banking in the Wake of the World Financial Crisis

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  • Miroslav Hrncir

    ()
    (University of Finance and Administration)

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    Abstract

    The article identifies causes of the world financial crisis and its impact on monetary policy and central banking. Under the pressure of crisis, the standard monetary policy of previous periods shifted to unconventional instruments of “quantitative easing”. This change represents move away from technical monetary policy towards a more activist approach. Will this shift be only temporary and monetary policy will return to traditional standards as the crisis subsides? Or will its impact be of a more permanent character? The article examines the applied unconventional monetary policy measures, their consequences and risk involved. For the past decades central banking has been dominated by consensus which holds the view that central bankers´ prime task is to keep inflation low and stable. Learning the lesson from the current crisis the article discusses the arguments whether monetary policy should be and could be more oriented to the broader issues of financial stability, not just price stability.

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    File URL: http://www.vsfs.cz/periodika/acta-2009-02.pdf
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    Bibliographic Info

    Article provided by University of Finance and Administration in its journal ACTA VSFS.

    Volume (Year): 3 (2009)
    Issue (Month): 2 ()
    Pages: 137-166

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    Handle: RePEc:prf:journl:v:3:y:2009:i:1:p:137-166

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    Related research

    Keywords: monetary policy; central banking; financial crisis; price stability; global imbalances; savings glut; liquidity glut; interest rates; quantitative easing; unconventional instruments balance sheets; asset market bubble; inflation expectations;

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    1. Frederic S. Mishkin, 2007. "Will monetary policy become more of a science?," Finance and Economics Discussion Series 2007-44, Board of Governors of the Federal Reserve System (U.S.).
    2. William R. White & Claudio E. V. Borio, 2004. "Whither monetary and financial stability? the implications of evolving policy regimes," BIS Working Papers 147, Bank for International Settlements.
    3. William R. White, 2006. "Is price stability enough?," BIS Working Papers 205, Bank for International Settlements.
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    Cited by:
    1. Jitka Koderová, 2012. "Milton Friedman and the Contemporary Monetary Policy," Český finanční a účetní časopis, University of Economics, Prague, vol. 2012(4), pages 15-31.

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