Monetary Policy in Exceptional Times

40 Pages Posted: 5 Oct 2010

See all articles by Michele Lenza

Michele Lenza

European Central Bank (ECB)

Huw Pill

European Central Bank (ECB)

Lucrezia Reichlin

London Business School; Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES); Centre for Economic Policy Research (CEPR); European Central Bank (ECB)

Multiple version iconThere are 3 versions of this paper

Date Written: September 28, 2010

Abstract

This paper describes the response of three central banks to the 2007-09 financial crisis: the European Central Bank, the Federal Reserve and the Bank of England. In particular, the paper discusses the design, implementation and impact of so-called "non-standard" monetary policy measures focusing on those introduced in the euro area in the aftermath of the failure of Lehman Brothers in September 2008. Having established the impact of these measures on various observable money market spreads, we propose an empirical exercise intended to quantify the macroeconomic impact of non-standard monetary policy measures insofar as it has been transmitted via these spreads. The results suggest that non-standard measures have played a quantitatively significant role in stabilising the financial sector and economy after the collapse of Lehman Bros., even if insufficient to avoid a significant fall in economic and financial activity.

Keywords: Non-standard monetary policy, financial crisis

JEL Classification: E52, E58

Suggested Citation

Lenza, Michele and Pill, Huw and Reichlin, Lucrezia, Monetary Policy in Exceptional Times (September 28, 2010). ECB Working Paper No. 1253. Available at SSRN: https://ssrn.com/abstract=1683963

Michele Lenza (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Huw Pill

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Lucrezia Reichlin

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES) ( email )

Ave. Franklin D Roosevelt, 50 - C.P. 114
Brussels, B-1050
Belgium
+32 2 650 4221 (Phone)
+32 2 650 4475 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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