Proposals of Monetary Policy Interventions to Overcome the Crisis

2016 ◽  
pp. 324-347
Keyword(s):  
Monetary Policy ◽  
Policy Interventions

Central Bank Planning

2018 ◽  
Author(s):  
Benjamin Braun
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Interest Rates ◽  
Practical Reasoning ◽  
Structural Break ◽  
Central Banks ◽  
State Agency ◽  
Policy Interventions ◽  
Forward Guidance

Central banks have increasingly used communication to guide market actors’ expectations of future rates of interest, inflation, and growth. However, aware of the pitfalls of (financial) central planning, central bankers until recently drew a line by restricting their monetary policy interventions to short-term interest rates. Longer-term rates, they argued, reflected decentralized knowledge and should be determined by market forces. By embracing forward guidance and quantitative easing (QE) to target long-term rates, central banks have crossed that line. While consistent with the post-1980s expansion of the temporal reach of monetary policy further into the future, these unconventional policies nevertheless mark a structural break—the return of hydraulic macroeconomic state agency, refashioned for a financialized economy. This chapter analyses the theoretical and practical reasoning behind this shift in the governability paradigm and examines the epistemic and reputational costs of modern central bank planning and the non-market setting of long-term bond prices.

scholarly journals Central bank planning: Unconventional monetary policy and the price of bending the yield curve

2017 ◽  
Author(s):  
Benjamin Braun
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Yield Curve ◽  
Structural Break ◽  
Central Banks ◽  
State Agency ◽  
Policy Interventions ◽  
Forward Guidance ◽  
Central Bankers

Central banks have increasingly used communication to guide market actors’ expectations of future rates of interest, inflation, and growth. However, aware of the pitfalls of (financial) central planning, central bankers used to draw a line by restricting their monetary policy interventions to short-term interest rates. Longer-term rates, they argued, reflected decentralised knowledge and should be determined by market forces. By embracing forward guidance and quantitative easing (QE) to target long-term rates, central banks have crossed that line. While consistent with the post-1980s expansion of the temporal reach of monetary policy into the future, these unconventional policies nevertheless mark a structural break – the return of hydraulic macroeconomic state agency, refashioned for a financialised economy.

scholarly journals Implementing Monetary Policy after the 2008 Financial Crisis

2019 ◽  
Vol 7 (9) ◽  
pp. 141-172
Author(s):  
Ioannis N. Kallianiotis
Keyword(s):  
Monetary Policy ◽  
Financial Crisis ◽  
Interest Rates ◽  
Global Financial Crisis ◽  
Target Range ◽  
Federal Funds ◽  
2008 Financial Crisis ◽  
Policy Interventions ◽  
Federal Funds Market ◽  
The 2008 Financial Crisis

Every six weeks or so (9 times during the year), the financial world watches as the Federal Open Market Committee (FOMC) decides on a target interest rate in the federal funds market for the next period. But what happens next? How do policymakers make sure that interest rates in the fed funds market trade within the target range? What will be the effect of the new target rate on the Wall Street and the Main Street? How efficient is so far the monetary policy after the latest global financial crisis? Is the target rate the correct one? The framework that the FOMC uses to implement monetary policy has changed over the last decade and continues to evolve today. Before the 2008 financial crisis, policymakers used one set of instruments to achieve the target rate. However, several policy interventions introduced soon after the crisis drastically altered the landscape of the federal funds market. This new and uncertain environment, with enormous reserves, necessitated a new set of instruments for monetary policy implementation. Lately, after December 2015, as the FOMC began to unwind the effects of these policy interventions, some questions arise: What rules will be followed by the Fed? What happens next as the federal funds market converges to a “new normal”? How effective will be the new policy? Can the Fed prevent a new crisis? The federal funds rate is very low and affects negatively the financial markets (bubbles are growing), the real rates of interest, and the deposit rates, which means the true economic welfare is falling and a new global recession is in preparation, if the latest easy money policy will continue.

Asset Pricing Bubbles

2016 ◽  
pp. 373-386
Author(s):  
Jaya Mamta Prosad ◽  
Sujata Kapoor ◽  
Jhumur Sengupta
Keyword(s):  
Public Policy ◽  
Monetary Policy ◽  
Asset Pricing ◽  
Relevant Literature ◽  
Policy Implications ◽  
After Effects ◽  
Proactive Approach ◽  
Policy Interventions ◽  
Regulatory Actions

The chapter focuses on the significance of asset pricing bubbles in recent times. It explores the nature of this anomaly and its role in influencing financial and economic scenario of a country. It attempts to develop an understanding on identifying the pricing bubbles, how they may appear and what are the factors behind them. Further, the chapter presents a series of past encounters with this anomaly, which helps the realizing the severity of its after-effects. Their consequences are critically examined with the help of relevant literature which provides the background for probable policy implications. These implications could be categorized into public policy, monetary policy and regulatory actions. The chapter concludes on the note that a proactive approach and timely policy interventions can help curb the instances of pricing bubble episodes.

The effect of monetary policy announcements and government interventions on the US insurance industry during the 2007-2009 crisis

2017 ◽  
Vol 18 (5) ◽  
pp. 500-522 ◽  
Author(s):  
Martin F. Grace ◽  
Jannes Rauch ◽  
Sabine Wende
Keyword(s):  
Monetary Policy ◽  
Financial Crisis ◽  
Stock Prices ◽  
Content Type ◽  
Insurance Sector ◽  
Second Stage ◽  
Policy Interventions ◽  
Insurance Firms ◽  
Stage Analysis ◽  
The Impact

Purpose The authors aim to analyze the impact of monetary policy interventions during the financial crisis of 2007-2009 on the stock prices of US insurance firms. Design/methodology/approach The authors use an event study methodology and a database of 89 policy announcements to analyze if monetary policy interventions could restore stability in the insurance sector. In addition, the authors conduct a second-stage analysis to identify the individual firms’ determinants of their stock market response. Findings The results indicate that the market reaction depends upon the type of policy intervention as well as the timing of the intervention. A second stage analysis examines firm level determinants of the insurers’ stock price responses and finds various firm specific factors also affect the insurers’ reaction to policy interventions. Originality/value First, to the best of the authors’ knowledge, this paper is the first to examine the impact of non-conventional policy announcements on firms from the insurance sector during the financial crisis. Moreover, the authors add to the literature an analysis on how conventional central bank announcements affect insurance firms.

Imperfect Knowledge and Monetary Policy

2006 ◽  
Author(s):  
Vítor Gaspar ◽  
Otmar Issing ◽  
Oreste Tristani ◽  
David Vestin
Keyword(s):  
Monetary Policy ◽  
Imperfect Knowledge
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