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The Role of Central Banks in Sustaining Economic Recovery and in Achieving Financial Stability

  • Siregar, Reza Yamora
  • Lim
  • C.S. Vincent

Whenever a financial crisis occurs, threatening a possible financial meltdown, central banks have to be at the forefront in combating, neutralizing the crisis and restoring financial stability and economic growth. In this regard, the present sub-prime crisis which originated from the US highlights a few key issues for SEACEN central banks. This paper reviews the policy responses to the crisis which include exit policy strategies from stimulus monetary packages. To strengthen the soundness of the financial system going forward, the paper also highlights counter-cyclical and macro-prudential regulations that central banks may want to actively look into. These include cross-border policy cooperation and coordination, particularly in the form of the college of supervisors. (This paper has also been published in the Journal of Advanced Studies in Finance, Vol.1, Issue1(1), Summer 2010,

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This book is provided by South East Asian Central Banks (SEACEN) Research and Training Centre in its series Staff Papers with number sp74 and published in 2010.
ISBN: 983-9478-80-X
Handle: RePEc:sea:spaper:sp74
Contact details of provider: Postal: Level 5, Sasana Kijang, Bank Negara Malaysia, 2 Jalan Dato? Onn, 50480 Kuala Lumpur
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  1. Yilmaz Akyuz, 2008. "The Current Global Financial Turmoil and Asian Developing Countries," Working Papers 2008/15, Turkish Economic Association.
  2. Claudio Borio & Ilhyock Shim, 2007. "What can (macro-)prudential policy do to support monetary policy?," BIS Working Papers 242, Bank for International Settlements.
  3. Douglas W. Diamond & Raghuram G. Rajan, 2003. "Money in a Theory of Banking," NBER Working Papers 10070, National Bureau of Economic Research, Inc.
  4. Beverly Hirtle & Til Schuermann & Kevin Stiroh, 2009. "Macroprudential supervision of financial institutions: lessons from the SCAP," Staff Reports 409, Federal Reserve Bank of New York.
  5. Yılmaz AKYÜZ, 2008. "The current global financial turmoil and Asian developing countries," Iktisat Isletme ve Finans, Bilgesel Yayincilik, vol. 23(273), pages 7-49.
  6. Ben S. Bernanke & Mark Gertler, 2001. "Should Central Banks Respond to Movements in Asset Prices?," American Economic Review, American Economic Association, vol. 91(2), pages 253-257, May.
  7. Erlend Nier, 2009. "Financial Stability Frameworks and the Role of Central Banks: Lessons From the Crisis," IMF Working Papers 09/70, International Monetary Fund.
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