When the global financial crisis began in the autumn of 2008, the central banks of some countries, primarily the Federal Reserve Bank in the USA and the European Central Bank in the European Union, undertook specific anti-crisis measures to reduce the negative effects of the financial crisis at the time.
In view of the above, how do you assess the role of central banking in the area of anti-crisis measures in the event of financial and currency crises?
Please reply
Best wishes
Hello Dariusz, you may like to check the article below. Best, Leo
https://www.academia.edu/6892946/In_face_of_changes_in_the_demand_for_money_what_is_the_proper_response_by_the_central_bank
Dariusz Prokopowicz I apologize if I'm off base here but my knee jerk reaction is to say that the Central Bank has failed completely in its obligations. Be it because there was no proper governance or market limitations to properly regulate the market, or it did not keep up with the development of new products, it failed. One of the lessons from 2008 that seems to have been forgotten is that the rating agencies lacked proper oversight/incentive to mark securities appropriately. You could say that their either did not read the prospectus of MBS or maybe even understand them, but even so I believe that the take away is that there was no proper alignment within these agencies to rate products accurately but rather to rate them regardless. I'm sure there are several different points of view on the Central Bank's obligations, my main point is that it is their role to monitor and regulate alignment of players to balance systemic risk.
Dear Colleagues and Friends from RG, Based on the above considerations and conclusions from the discussion on the interesting discussed issues of the role of central banking in maintaining financial system security the following thesis that the recent global financial crisis of 2008 confirmed the important role of central banking in maintaining the security of the financial system, in particular the banking system .
In the context of the above considerations, the following key questions arise:
- Are the level of interest rates and other instruments of the central bank's monetary policy significant factors influencing the pace of economic growth in the long run and the shaping of business cycles?
- In a situation of development of the financial crisis, do central banks always have sufficient monetary policy tools to stop this development of crisis at any time during the development of the financial crisis?
- Can the issue of the level of independence of the central bank's monetary policy from the budgetary policy be important for the central bank's control of the level of credit risk in the financial system?
- What do you think about this topic?
- What is your opinion on this topic?
Please reply
Dear Colleagues and Friends from RG, Are there already results of scientific research that would confirm or disprove the thesis that the reduction of interest rates by central banking and the applied interventionist mild monetary policy significantly reduced the scale of the economic downturn caused by the development of the SARS-CoV-2 Coronavirus pandemic (causing Covid-19 disease)?
What is your opinion on this topic?
I am asking for an answer and invite you to a discussion,
Thank you very much and best regards,
Dariusz Prokopowicz
Dear Emmanuel V Murray, Leonidas Zelmanovitz, Marson Cunha, Thank you very much for participating in this discussion. Thank you for your inspiring, interesting and highly substantive answer.
Thank you very much and best regards,
Have a nice day,
Dariusz Prokopowicz
Central banking played a key role in reducing the scale of the stock market crash when the World Health Organization announced the SARS-CoV-2 (Covid-19) coronavirus pandemic in March 2020. Therefore, the lowered interest rates were one of the important factors in limiting the scale of the recession in economies in the second quarter of 2020.
Best regards,
Dariusz Prokopowicz
Dear Emmanuel V Murray,
Thanks for the kind words and positive recommendations of this discussion, in which the debaters formulate their answers to the question: How do you assess the role of central banking in the field of anti-crisis measures in the event of financial and currency crises?
Greetings,
Dariusz Prokopowicz
Dear Emmanuel V Murray,
Thanks for your positive assessment of the issues of this discussion on the role of anti-crisis monetary policy of central banking during economic crises.
Thank you, Regards,
Dariusz Prokopowicz
Dear Marson Cunha,
Yes you are right. You pointed to the important factors behind the 2008 global financial crisis. These factors include unreliable and unethical actions of business practices, ignoring the basic principles of systemic credit risk management in rating agencies and investment banks. The role of central banking in this matter is also crucial. The question still remains open: Have these issues been fully corrected to avoid the emergence of a similar crisis in the future?
Thank you very much,
Best wishes,
Dariusz Prokopowicz