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Financial Crisis, Global Liquidity and Monetary Exit Strategies

Discussion Papers 995, 34 S.

Ansgar Belke

2010

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Abstract

We develop a roadmap of how the ECB should further reduce the volume of money (money supply) and roll back credit easing in order to prevent inflation. The exits should be step-by-step rather than one-off. Communicating about the exit strategy must be an integral part of the exit strategy. Price stability should take precedence in all decisions. Due to vagabonding global liquidity, there is a strong case for globally coordinating monetary exit strategies. Given unsurmountable practical problems of coordinating exit with asymmetric country interests, however, the ECB should go ahead - perhaps joint with some Far Eastern economies. Coordination of monetary and fiscal exit would undermine ECB independence and is also technically out of reach within the euro area.



JEL-Classification: E52;E58;F42;E63
Keywords: Exit strategies, international policy coordination and transmission, open market operations, unorthodox monetary policy
Frei zugängliche Version: (econstor)
http://hdl.handle.net/10419/36746

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