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Central banks: from omnipotence to impotence?

Papadia, Francesco, Wolff, Guntram B., (2016), “Central banks: from omnipotence to impotence?”, Bruegel Blog, 2 March.

Like the price of financial assets, the market assessment of the capacity of central banks to achieve their price stability objective fluctuates between omnipotence and impotence. We do not agree with this binary view of the world and we examine in this post the case of the European Central Bank (ECB). We argue that the ECB still has some instruments left. It should consider moving beyond increasing sovereign debt purchases, which would be ineffective and pose risks. More important is to step up work on structural and fiscal policies.

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