OECD Economics Department Working Papers

ISSN :
1815-1973 (online)
DOI :
10.1787/18151973
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Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.
 

Monetary Policy Responses to the Crisis and Exit Strategies You or your institution have access to this content

Authors:
Makoto Minegishi1, Boris Cournède1
Author Affiliations
  • 1: OECD, France

Publication Date
18 Feb 2010
Bibliographic information
No.:
753
Pages
50
DOI
10.1787/5kml6xm7qgs6-en

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Central banks have responded with exceptional vigour to the crisis by using their traditional interest-rate tools to their limits and deploying a wide range of unconventional measures. This paper documents these responses in a systematic way, reviews the evidence about their impact, and discusses the need to exit from these measures. Unconventional monetary policy measures appear to have been broadly successful in terms of improving conditions in financial markets and stabilising the real economy. In line with the improvement in functioning of financial markets, however, these unconventional measures should be gradually removed. Given the considerable changes in the size and composition of central banks' balance sheets, the exit will likely involve the combination of various tools. More challenging questions surround the decisions of when and how fast the current exceptional amount of stimulus should be reduced and then eliminated. A particularly important goal will be to preserve the hard-won anchoring of inflation expectations and dissipate any hypothetical fears that central banks? greater risk exposure and purchases of bonds issued or backed by governments might have reduced their independence regarding monetary policy decisions.
Keywords:
unconventional policy, exit strategies, monetary policy, financial crisis
JEL Classification:
  • E31: Macroeconomics and Monetary Economics / Prices, Business Fluctuations, and Cycles / Price Level; Inflation; Deflation
  • E42: Macroeconomics and Monetary Economics / Money and Interest Rates / Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems
  • E44: Macroeconomics and Monetary Economics / Money and Interest Rates / Financial Markets and the Macroeconomy
  • E50: Macroeconomics and Monetary Economics / Monetary Policy, Central Banking, and the Supply of Money and Credit / General
  • E51: Macroeconomics and Monetary Economics / Monetary Policy, Central Banking, and the Supply of Money and Credit / Money Supply; Credit; Money Multipliers
  • E52: Macroeconomics and Monetary Economics / Monetary Policy, Central Banking, and the Supply of Money and Credit / Monetary Policy
  • E58: Macroeconomics and Monetary Economics / Monetary Policy, Central Banking, and the Supply of Money and Credit / Central Banks and Their Policies