Jong-Wha, Lee, (2016), “The Way Back for Monetary Policy”, Project Syndicate, 17 May
The central banks of major advanced economies have been navigating uncharted territory in recent years. While their use of a range of unconventional monetary-policy tools has had benefits, it has also generated significant uncertainty, without fully stabilizing the world economy. Now the time has come to head back toward more familiar policy terrain. Following the 2008 financial meltdown, the US Federal Reserve cut the policy rate to almost zero and pursued so-called quantitative easing (QE), by purchasing long-term securities from the public and private sectors. The central banks of the European Union, Japan, and the United Kingdom soon launched similar unconventional programs. The result was a vast amount of cheap liquidity that helped to stabilize the financial sector, restore stock and real-estate prices, and increase domestic demand. All of this helped to limit the fallout of the financial crisis and push the global economy toward recovery.
Relevant Posts
- Den Haan, Wouter, Ellison, Martin, Ilzetzki. Ethan, McMahon, Michael, Reis, Ricardo, (2016), “The future role of unconventional monetary policy: CFM Survey results“, Voxeu, 17 May
- Cloyne, James, Ferreira, Clodomiro F.,Surico, Paolo, (2016), “Household debt and the transmission of monetary policy: New evidence”, Voxeu, 21 April