Post-Crisis Challenges for Central Banks

Abstract

The financial crisis forced central banks to rediscover the importance of financial stability. The aim of the article is to identify and analyze challenges that central banks face in a post-crisis environment. The main challenges include defining financial stability and systemic risk, as well as, quantifying those phenomena. Central banks also have to conduct macroprudential policy to mitigate systemic risk, along with coordinating it with monetary policy. Apart from that, minimizing risks of quantitative easing and introducing an effective exit strategy will also prove challenging. In the case of the EU, development of financial integration depends on implementing banking union and mitigating its current construction flaws. In conclusion, these challenges are linked with examples of policies that central banks can introduce into practice to better fulfill their financial stability mandate.

Keywords: central bank, financial stability, macroprudential policy, financial crisis

JEL Classification: E50, E58, G28