Ultra Easy Monetary Policy and the Law of Unintended Consequences

White, William R.

doi:10.24149/gwp126

Cited by 63 publications

(32 citation statements)

References 51 publications

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“…2007/2008 zutage traten, sind daher auch kein Marktergebnis, sondern Folge verfehlter staatlicher Eingriffe und Politiken. Für das Beispiel der globalen Finanzkrise 2007/2008 gehören dazu auch die mangelnde Durchsetzung des Haftungsprinzips (Sinn ) sowie die Verletzung des Primats der Währungspolitik (White ). Folglich wird die Position vertreten, dass die Finanzkrise gar keine Krise, sondern ein „Aufwachen“ der Finanzmärkte aus einem Schlaf darstellt, in den sie Regierungen und Zentralbanken mit einer unglaubwürdigen no‐bail out Politik sowie Niedrigzinsen versetzt haben.…”

Section: Der Lender Of Last Resort – Zentralbank Und Staat Als Institunclassified

Ordnung und Vertrauen - Zentralbank und Staat in der Eurokrise

Winkler

2013

Perspektiven der Wirtschaftspolitik

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The management of the euro crisis, i.e. the ECB's lender of last resort activities for crisis countries and crisis banks, as well as the establishment of the European Stability Mechanism and a European banking union, has been severely criticized by economists following the German ordo‐liberal tradition. They argue that crisis management violates key principles of economic policy, namely the principle of liability and the principle of stable money. Accordingly, euro crisis management undermines private sector confidence in the market economy and in the currency. This article argues that this view neglects the fact that the crisis itself reflects a loss of confidence. Thus, crisis management has to restore confidence first, which can only be achieved by measures that inherently conflict with ordo‐liberalism. As a result, the critique of euro crisis management is misplaced as ordo‐liberal principles provide a useful guideline for economic policies only after confidence has been restored.

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Section: Der Lender Of Last Resort – Zentralbank Und Staat Als Institunclassified

Ordnung und Vertrauen - Zentralbank und Staat in der Eurokrise

Winkler

2013

Perspektiven der Wirtschaftspolitik

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“…Under status negativus, a different understanding would emerge, namely and roughly that there is nothing that the polity could do and the crisis was rather a consequence of too lax monetary policy in in 2000s and overregulation of productive usages of money. There is an abundant literature on why the type of policy response deployed by central banks is at least problematic (TAYLOR, 2012;WHITE, 2012). This paper's task, however, is to assess how the freedoms of the citizens are impacted by such activities.…”

Section: Unorthodox Monetary Policymentioning

confidence: 99%

Central banks and the rights and freedoms of the citizen

Schneider

2018

Mises Journal

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When central banks act, their policies and instruments impact not only on the economy, but on people’s rights as well. For this reason, central banks depend on politics, since politics is the organization of the polity – in which central banks and people’s rights are all incorporated. The same applies to an operational level: the central banks are interconnected with other institutions, for instance, the Executive Branch, economic agents and the whole economy through money, interest rates, and more recently, through “unorthodox monetary policy”. This paper examines how central banks operate pursuing the enlargement of the scope of their activities, the expansion of their means, and their reach. The aim of this article is to highlight that, by putting into practice what has been mentioned above, central banks reduce citizens’ freedom and rights. This analysis is applied to two cases, the “unorthodox monetary policy” and the ban on cash. Given these points, the possible remedies of the expansion of the activities of the central banks will be discussed.

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“…Albertazzi and Marchetti (2010) provide some evidence of evergreening practices by small and less-capitalised banks in Italy during the initial phase of the financial crisis (September 2008-March 2009). According to Bank of England (2012), forbearance by banks on existing loans coupled with low policy rates may have contributed to the recent rise in the number of zombie companies in the United Kingdom downturns prevents the needed purging of past malinvestments, resulting in a growing stock of unproductive investment and expanding debt accumulation, which reduce potential growth over time and the effectiveness of monetary policy when a balance-sheet recession hits the economy (White, 2012). Capital misallocation can also arise from the possibility to finance investment projects with a marginal return equal to the prevailing near-zero interest rate.…”

Section: Unintended Consequences Of Ultra-stimulative Monetary Policiesmentioning

confidence: 99%

The Effectiveness of Monetary Policy since the Onset of the Financial Crisis

Bouis

Rawdanowicz

Renne

et al. 2013

OECD Economics Department Working Papers

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JT03343552Complete document available on OLIS in its original format This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. ECO/WKP(2013)73 Unclassified English -Or. English ECO/WKP(2013)73 2 ABSTRACT/RÉSUMÉThe effectiveness of monetary policy since the onset of the financial crisisIn the wake of the Great Recession, a massive monetary policy stimulus was provided in the main OECD economies. It helped to stabilise financial markets and avoid deflation. Nonetheless, GDP growth has been sluggish and in some countries lower than expected given the measures taken, and estimated economic slack remains large. In this context, this paper assesses the effectiveness of monetary policy in recent years. It finds that notwithstanding an almost full transmission of policy interest rate cuts and unconventional policy measures to higher asset prices and lower cost of credit in and outside the banking sector in most countries, with the exception of vulnerable euro area economies, monetary policy stimulus did not show up in stronger growth due to a combination of three factors. First, lower policy interest rates may not have provided as much stimulus as expected given the evidence of a decrease in natural interest rates, resulting from the estimated decline in potential GDP growth in the wake of the crisis. Second, balance sheet adjustments of non-financial companies and households, large uncertainty as well as simultaneous and considerable fiscal consolidation in many OECD countries constituted important headwinds. Third, the bank lending channel of monetary policy transmission appears to have been impaired, mainly due to considerable balance sheet adjustments and prevailing uncertainty, which together limited banks' capacity and willingness to supply credit. The paper also stresses that the monetary accommodation risks having unintended negative consequences which are likely to increase with its duration. JEL classification codes: E32; E43; E44; E5; G01; H12; G28 Keywords: Monetary policy, natural interest rates, credit, financial markets, financial crisis ****************************** L'efficacité de la politique monétaire depuis le début de la crise financière Dans le sillage de la Grande Récession, un important stimulus monétaire a été fourni dans les principales économies de l'OCDE. Il a permis de stabiliser les marchés financiers et d'éviter la déflation. Toutefois, la croissance du PIB a été lente et dans certains pays plus faible qu'attendue compte tenu des mesures prises, et le ralentissement économique estimé demeure important. Dans ce contexte, ce papier évalue l'efficacité de la politique monétaire au cours des années récentes. Il trouve qu'en dépit d'une transmission presque complète des baisses de taux d'intérêt et des mesures non conventionnelles de politique monétaire à des prix d'actifs plus élevés et un coût du crédit plus faible à l'intérie...

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Ultra Easy Monetary Policy and the Law of Unintended Consequences

Cited by 63 publications

References 51 publications

Ordnung und Vertrauen - Zentralbank und Staat in der Eurokrise

Ordnung und Vertrauen - Zentralbank und Staat in der Eurokrise

Central banks and the rights and freedoms of the citizen

The Effectiveness of Monetary Policy since the Onset of the Financial Crisis

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