Skip to main content

Unconventional Monetary Policy

Central banks around the world have engaged in unconventional monetary over the past five years. Quantitative Easing (where central banks create money to buy long-dated governments bonds or even mortgage-backed securities) and forward guidance (where central banks commit to low interest rates until certain criteria are met) are the new tools in the central banking tool-kit.  However, many commentators are concerned about the distributional consequences of these policies i.e., that they benefit Wall Street at the expense of Main Street. Indeed, in this WSJ article, the Fed's former main Quantitative Easer argues that Fed has been captured by Wall Street banks and is pursuing these unconventional policies at their behest. In other words, the Fed is no longer an independent central bank! Click here for an op-ed by Raghuram Rajan, the Governor of the Reserve Bank of India, on unconventional monetary policy.


Popular posts from this blog

The Failure of Herstatt Bank

As an undergraduate, I was taught about the failure of Herstatt Bank in 1974 and Herstatt risk. This bank was only the 35th largest bank in Germany at the time so why would anyone be interested in studying its failure? Herstatt failed because of its involvement in risky foreign exchange business. When it closed its doors on 26 June 1974, counterparty banks (mainly in New York) had not received dollars due to them because of time-zone differences - this is known as settlement risk. The cross-jurisdictional implications of its failure resulted in the Bank for International Settlements setting up the Basel Committee on Banking Supervision and Herstatt's failure was a key reason for the establishment of real-time gross settlements systems, which ensures that payments between two banks are executed in real time. The Bank of England's Ben Norman has an interesting post on Herstatt over at the Bank's new blog ( Bank Underground ). As well as giving an excellent overview of

Boom and Bust: A Global History of Financial Bubbles

Boom and Bust: A Global History of Financial Bubbles, co-authored with my colleague Will Quinn , is forthcoming in August. It is published by Cambridge University Press and is available for pre-order at Amazon , Barnes and Noble , Waterstones and Cambridge University Press . 

The Great Depression

Marginal Revolution University has a great video on the Great Depression.