Macro-Financial Risks and Central Banks: What Changes Has the Crisis Triggered?

The global crisis has raised important questions about the role of the central banks in promoting financial stability. One of the lessons emphasized by the crisis is that central banks will, without any doubt, be involved whenever a systemic financial crisis occurs. In this line, the present paper intends to examine and question the role of central banks in mitigating macro-financial risks, with a focus on their mandate in respect of the monetary policy issues. Our approach is based on a theoretical debate related to the attributes and behavior of central banks, illustrating thus their role in the assurance of financial stability. In the context of the present financial crisis, the legitimacy of the policies applied by central banks in order to pursue and achieve the stability of the financial systems was again questioned, especially by some partisans of the Austrian school. They blame the central banks for the onset of the worldwide crisis and try to prove that both their activity and involvement in this sphere are unnecessary. Starting from this background, our paper demonstrates that it is not opportune and appropriate to put the burden of crisis mitigation failure only on the shoulders of these institutions. Moreover, the mandate assigned to central banks has to be strengthened by increasing their responsibilities in the field of financial stability. This aim can be achieved if financial stability is approached as a monetary policy objective. In other words, we reckon that it is inappropriate to focus the theoretical debates on the legitimacy of central banks in assuring the financial stability, as they should rather concentrate on the tools central banks dispose of in order to prevent and mitigate macro-financial risks, as well as on the efficiency of these instruments in the assurance of financial stability.