The (Un)success and future of the ECB’s monetary policy after the global financial crisis

Abstract

Uğur Akkoç, Dilek Durusu-Çiftçi The (Un)Success and Future of the ECB’s Monetary Policy after the Global Financial Crisis Introduction The 2008 global financial crisis radically transformed monetary policies. In the first period of the crisis, against the deterioration in financial markets and the stagnation of the economy, measures were first attempted with standard expansionary monetary policy. The characteristics of this period are the application of high liquidity injections to the banking system, and then a rigorous monetary policy that reduces interest rates to zero bands. However, the bankruptcy of Lehman Brothers in the last quarter of 2008 was a turning point in monetary policies. It was understood that the “interest” instrument and open market transactions, which were used to ensure macroeconomic stability before the crisis, did not work in the crisis and post-crisis period, and there was no doubt that the liquidity increase provided by the interest rate cut was not enough. In other words, developed countries have continued to face liquidity problems even at the near-zero interest level. During this period, high unemployment, low growth, and high public debt, as well as inflation rates lower than projected inflation, created significant constraints for policymakers. Eventually, the fact that the 2008 global crisis, even though price stability has been achieved, has opened the debate on traditional monetary policy. Although the role of central banks was the “last credit authority” in the post-crisis periods, the above-mentioned economic restrictions led central…. © Peter Lang GmbH.