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Financial Crisis, Global Liquidity and Monetary Exit Strategies

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  • Belke, Ansgar

Abstract

We develop a roadmap of how the ECB should further reduce the volume of money (money supply) and roll back credit easing in order to prevent inflation. The exits should be step-by-step rather than one-off . Communicating about the exit strategy must be an integral part of the exit strategy. Price stability should take precedence in all decisions. Due to vagabonding global liquidity, there is a strong case for globally coordinating monetary exit strategies. Given unsurmountable practical problems of coordinating exit with asymmetric country interests, however, the ECB should go ahead - perhaps joint with some Far Eastern economies. Coordination of monetary and fiscal exit would undermine ECB independence and is also technically out of reach within the euro area.

Suggested Citation

  • Belke, Ansgar, 2010. "Financial Crisis, Global Liquidity and Monetary Exit Strategies," Ruhr Economic Papers 183, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    • Handle: RePEc:zbw:rwirep:183
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    References listed on IDEAS

    as
    1. Jürgen von Hagen & Jean Pisani-Ferry & Jakob von Weizsäcker, 2009. "A European Exit Strategy," Policy Briefs 328, Bruegel.
    2. Ansgar Belke & Matthias Göcke & Martin Günther, 2009. "When Does It Hurt?: The Exchange Rate "Pain Threshold" for German Exports," Discussion Papers of DIW Berlin 943, DIW Berlin, German Institute for Economic Research.
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    6. Claudio Borio & Anna Zabai, 2018. "Unconventional monetary policies: a re-appraisal," Chapters, in: Peter Conti-Brown & Rosa M. Lastra (ed.), Research Handbook on Central Banking, chapter 20, pages 398-444, Edward Elgar Publishing.
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    11. Belke, Ansgar & Potrafke, Niklas, 2012. "Does government ideology matter in monetary policy? A panel data analysis for OECD countries," Journal of International Money and Finance, Elsevier, vol. 31(5), pages 1126-1139.
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    13. Jürgen von Hagen, 2009. "The monetary mechanics of the crisis," Policy Contributions 320, Bruegel.
    14. Belke, Ansgar & Rees, Andreas, 2009. "The Importance of Global Shocks for National Policy Makers - Rising Challenges for Central Banks," Ruhr Economic Papers 135, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
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    Cited by:

    1. Andreea Andries, 2012. "Justification and Implementation of Exit Strategies in the Context of the Current Crisis," EuroEconomica, Danubius University of Galati, issue 2(31), pages 5-13, May.
    2. Marco Passarella, 2013. "Financial Integration in the European Union: an Analysis of ECB’s role," Working papers wpaper04, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    3. Treu, Johannes, 2010. "Anmerkungen zur möglichen geldpolitischen Exit-Strategie der EZB," Wirtschaftswissenschaftliche Diskussionspapiere 04/2010, University of Greifswald, Faculty of Law and Economics.

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    More about this item

    Keywords

    Exit strategies; international policy coordination and transmission; open market operations; unorthodox monetary policy;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

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