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Monetary Policy Implementation during the Crisis in 2007 to 2008

Author

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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.

Suggested Citation

  • Clemens Jobst, 2009. "Monetary Policy Implementation during the Crisis in 2007 to 2008," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 53-77.
  • Handle: RePEc:onb:oenbmp:y:2009:i:1:b:4
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    Citations

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    Cited by:

    1. Gabrisch, Hubert & Orlowski, Lucjan T., 2010. "The Extreme Risk Problem for Monetary Policies of the Euro-Candidates," IWH Discussion Papers 12/2010, Halle Institute for Economic Research (IWH).
    2. Belke, Ansgar & Klose, Jens, 2010. "(How) Do the ECB and the Fed React to Financial Market Uncertainty? – The Taylor Rule in Times of Crisis," Ruhr Economic Papers 166, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    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;Association for Comparative Economic Studies, vol. 53(4), pages 511-534, December.
    5. Ansgar Belke & Jens Klose, 2010. "(How) Do the ECB and the Fed React to Financial Market Uncertainty? – The Taylor Rule in Times of Crisis," Ruhr Economic Papers 0166, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    6. repec:zbw:rwirep:0166 is not listed on IDEAS
    7. 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.
    8. Morgunov, V.I., 2016. "The Liquidity Management of the Banking Sector and the Short-Term Money Market Interest Rates," Working Papers 21311, Russian Presidential Academy of National Economy and Public Administration.
    9. Christopher Weber, 2017. "The Collateral Policy of Central Banks - An Analysis Focusing on the Eurosystem," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 72.

    More about this item

    Keywords

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

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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