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Monetary policy and balance sheet adjustment

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  • Issing, Otmar

Abstract

In the wake of the Global Financial Crisis that started in 2007, policymakers were forced to respond quickly and forcefully to a recession caused not by short-term factors, but rather by an over-accumulation of debt by sovereigns, banks, and households: a so-called balance sheet recession. Though the nature of the crisis was understood relatively early on, policy prescriptions for how to deal with its consequences have continued to diverge. This paper gives a short overview of the prescriptions, the remaining challenges and key lessons for monetary policy.

Suggested Citation

  • Issing, Otmar, 2014. "Monetary policy and balance sheet adjustment," SAFE White Paper Series 15, Leibniz Institute for Financial Research SAFE.
    • Handle: RePEc:zbw:safewh:15
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    File URL: https://www.econstor.eu/bitstream/10419/98159/1/78826446X.pdf
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    References listed on IDEAS

    as
    1. Mr. Otmar Issing, 2011. "Lessons for Monetary Policy: What Should the Consensus Be?," IMF Working Papers 2011/097, International Monetary Fund.
    2. Carmen M. Reinhart & Kenneth S. Rogoff, 2014. "This Time is Different: A Panoramic View of Eight Centuries of Financial Crises," Annals of Economics and Finance, Society for AEF, vol. 15(2), pages 215-268, November.
    3. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "Varieties of Crises and Their Dates," Introductory Chapters, in: This Time Is Different: Eight Centuries of Financial Folly, Princeton University Press.
    4. Hayek, F. A., 2012. "Hayek on Hayek," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226321202 edited by Kresge, Stephen & Wenar, Leif, December.
    5. Otmar Issing, 2011. "Lessons for monetary policy: what should the consensus be?," Globalization Institute Working Papers 81, Federal Reserve Bank of Dallas.
    6. Otmar Issing, 2012. "Central Banks - Paradise Lost," IMES Discussion Paper Series 12-E-10, Institute for Monetary and Economic Studies, Bank of Japan.
    7. Issing, Otmar, 2012. "Central banks: Paradise lost," CFS Working Paper Series 2012/06, Center for Financial Studies (CFS).
    8. Axel Leijonhufvud, 2009. "Out of the corridor: Keynes and the crisis," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 33(4), pages 741-757, July.
    9. Moritz Schularick & Alan M. Taylor, 2012. "Credit Booms Gone Bust: Monetary Policy, Leverage Cycles, and Financial Crises, 1870-2008," American Economic Review, American Economic Association, vol. 102(2), pages 1029-1061, April.
    10. Issing, Otmar, 2011. "Lessons for monetary policy: What should the consensus be?," CFS Working Paper Series 2011/13, Center for Financial Studies (CFS).
    11. Morten L. Bech & Leonardo Gambacorta & Enisse Kharroubi, 2014. "Monetary Policy in a Downturn: Are Financial Crises Special?," International Finance, Wiley Blackwell, vol. 17(1), pages 99-119, March.
    12. Claudio Borio, 2014. "Monetary policy and financial stability: what role in prevention and recovery?," BIS Working Papers 440, Bank for International Settlements.
    13. Otmar Issing, 2012. "Central Banks - Paradise Lost," IMES Discussion Paper Series 12-E-10, Institute for Monetary and Economic Studies, Bank of Japan.
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    Cited by:

    1. Jorg Bibow, 2015. "The Euro's Savior? Assessing the ECB's Crisis Management Performance and Potential for Crisis Resolution," Economics Working Paper Archive wp_845, Levy Economics Institute.
    2. Jin, Xiaolong & Wu, Qiuwei & Jia, Hongjie, 2020. "Local flexibility markets: Literature review on concepts, models and clearing methods," Applied Energy, Elsevier, vol. 261(C).

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    Keywords

    recession; monetary policy; balance sheet adjustment;
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