Understanding the Interventionist Impulse of the Modern Central Bank

7 Pages Posted: 30 Mar 2013

Date Written: June 15, 2012

Abstract

The financial crisis of 2007 and 2008 was a watershed event for the Federal Reserve and other central banks. The extraordinary actions they took have been described, alternatively, as a natural extension of monetary policy to extreme circumstances or as a problematic exercise in credit allocation. I have expressed my view elsewhere that much of the Fed’s response to the crisis falls in the latter category rather than the former (Lacker 2010). Rather than reargue that case, I want to take this opportunity to reflect on some of the institutional reasons behind the prevailing propensity of many modern central banks to intervene in credit markets.

Keywords: federal reserve bank, US central banking system, financial crisis, great recession, inflation, monetary policy, federal economic policy

JEL Classification: E50, E51, E52, E58

Suggested Citation

Lacker, Jeffrey M., Understanding the Interventionist Impulse of the Modern Central Bank (June 15, 2012). Cato Journal, Vol. 32, No. 2, 2012, Available at SSRN: https://ssrn.com/abstract=2241025

Jeffrey M. Lacker (Contact Author)

Federal Reserve Bank of Richmond ( email )

P.O. Box 27622
Richmond, VA 23261
United States
804-697-8279 (Phone)
804-697-8461 (Fax)

HOME PAGE: http://www.richmondfed.org

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