Financial Crisis, Global Liquidity and Monetary Exit Strategies
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.
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| Length: | 34 p. |
| Date of creation: | 2010 |
| Handle: | RePEc:diw:diwwpp:dp995 |
| Contact details of provider: | Postal: Mohrenstraße 58, D-10117 Berlin Phone: xx49-30-89789-0 Fax: xx49-30-89789-200 Web page: http://www.diw.de/en Email: More information through EDIRC
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"When Does It Hurt?: The Exchange Rate "Pain Threshold" for German Exports,"
Discussion Papers of DIW Berlin
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