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Central Banking after the Great Recession

Central Banking after the Great Recession: Lessons Learned, Challenges Ahead

David Wessel editor
Copyright Date: 2014
  • Book Info
    Central Banking after the Great Recession
    Book Description:

    The global financial crisis is largely behind us, but it left challenges it posed to the stability of the world's financial system, to the well-being of families all over the globe and to the academic consensus on the way the economy works.� To describe those challenges and the lessons learned, the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution turned to front-line policymakers and some of their most prominent critics. This volume provides the papers the Hutchins Center commissioned-on unconventional monetary policy, on financial regulation, on the impact of the crisis on the independence of the Fed-and transcripts of a lively discussion of those issues.� It also includes an interview with Ben Bernanke, then in his final weeks at Fed chairman, by Liaquat Ahamed, author of the Pultizer-Prize winningLords of Finance.

    eISBN: 978-0-8157-2610-4
    Subjects: Finance, Economics, Business

Table of Contents

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  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
    (pp. vii-viii)
    (pp. 1-4)

    The January 2014 inaugural event of the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution focused on lessons that the Federal Reserve and other central banks have—or should have—learned from the most severe financial crisis the world economy has weathered in seventy-five years. The session was an encouraging beginning toward our goals of increasing public understanding of fiscal and monetary policy and improving the quality and efficacy of those policies. As Brookings President Strobe Talbott said in his introductory remarks:

    Monetary and fiscal policies are the purview of different parts of the federal government, but...

    (pp. 5-20)
    Liaquat Ahamed and Ben Bernanke

    Two weeks before the end of his eight-year term as chairman of the Federal Reserve, Ben Bernanke was interviewed by Liaquat Ahamed, a Brookings trustee and author of the Pulitzer Prize–winningLords of Finance: The Bankers Who Broke the World. As Glenn Hutchins noted in introducing the conversation, Ahamed’s book was about the mistakes that central bankers made during the Great Depression. The story of Ben Bernanke’s tenure is about the steps the Federal Reserve took to avoid another Great Depression. An edited transcript of the conversation follows.

    AHAMED: The way you handled the financial crisis in 2008 will...

  6. 3 MONETARY POLICY WHEN RATES HIT ZERO: Putting Theory into Practice
    (pp. 21-52)

    It has been said, “An economist is a man who, when he finds something works in practice, wonders if it works in theory.”¹ The study of the zero lower bound (ZLB) on nominal interest rates is an example of precisely the opposite: economists first figuring out what works in theory and then seeing if it works in practice. Japan’s experience with price deflation and zero short-term interest rates beginning in the 1990s led to a flurry of economic research on the ZLB and its implications for monetary policy (see, for example, Benhabib, Schmitt-Grohé, and Uribe 2001; Eggertsson and Woodford 2003;...

  7. 4 REGULATORY REFORM: Whatʹs Done? What Isnʹt?
    (pp. 53-90)

    The crisis that broke in 2007 and brought the international financial system to its knees in late 2008, threatening a repeat of the Great Depression, left the credibility of financial regulation and supervision in tatters. Until this is repaired, confidence in the financial system itself will remain fragile.

    Of course there were plenty of other factors behind the crisis: a badly unbalanced global economy, with much of the West owing too much to the high-saving economies of the East; a rampant search for yield associated with declining global real interest rates and persistently easy monetary conditions; myopia about risk; soporific...

    (pp. 91-110)

    We are going through an extraordinary period in business cycles and central banking. The too-calm, too-confident veneer of the Great Moderation was shattered by the worst financial crisis in eighty years. The Federal Reserve—indeed central banks all over the industrial world—took extraordinary actions to make sure the crisis was not followed by an economic result like that of the 1930s, and they continue to pursue policies that not so long ago would have been considered unthinkable.

    Naturally, understandably, and appropriately, these circumstances have increased the scrutiny of central banks and raised questions about the goals, governance, and accountability...

    (pp. 111-114)
  10. Back Matter
    (pp. 115-115)