Non-Standard Monetary Policy Measures and Monetary Developments

33 Pages Posted: 16 Jan 2011

See all articles by Domenico Giannone

Domenico Giannone

Federal Reserve Banks - Federal Reserve Bank of New York; Centre for Economic Policy Research (CEPR)

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 2 versions of this paper

Date Written: January 12, 2011

Abstract

Standard accounts of the Great Depression attribute an important causal role to monetary policy errors in accounting for the catastrophic collapse in economic activity observed in the early 1930s. While views vary on the relative importance of money versus credit contraction in the propagation of this policy error to the wider economy and ultimately price developments, a broad consensus exists in the economics profession around the view that the collapse in financial intermediation was a crucial intermediary step. What lessons have monetary policy makers taken from this episode? And how have they informed the conduct of monetary policy by leading central banks in recent times? This paper sets out to address these questions, in the context of the financial crisis of 2008-09 and with application to the euro area. It concludes that the Eurosystem’s non-standard monetary policy measures have supported monetary policy transmission and avoided the calamity of the 1930s.

Keywords: Non-standard monetary policy, monetary policy shocks, Great Recession, money and credit

JEL Classification: E5, E4, E32

Suggested Citation

Giannone, Domenico and Lenza, Michele and Pill, Huw and Reichlin, Lucrezia, Non-Standard Monetary Policy Measures and Monetary Developments (January 12, 2011). ECB Working Paper No. 1290. Available at SSRN: https://ssrn.com/abstract=1739051

Domenico Giannone (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
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Centre for Economic Policy Research (CEPR)

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Michele Lenza

European Central Bank (ECB) ( email )

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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 )

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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 )

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Brussels, B-1050
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+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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