La politique monétaire à la lumière de la crise


We have learned a great deal from the dramatic events that unfolded in the Fall of 2008 with the failure of Lehman Brothers. The present text highlights some of the key lessons for monetary policy from this important historical episode.I start by stressing the pre-crisis achievement on the monetary front, namely the taming of inflation in the last quarter of the twentieth century. This achievement can be attributed to the recognition of the importance of central bank independence and the adoption of the principles of inflation targeting. Despite this success, central banks are in the fire of the critiques for their imputed responsibility in the occurrence of the crisis itself. I argue that this is at most a partial intellectual responsibility that can be traced to a shared overestimation of the impact of recent advances in financial risk management and an underestimation of the welfare cost of a global financial crisis. Central banks’reactions at the outset of the crisis was a model of a flexible application of principles learned from the Great Depression. The avoidance of a new episode of similar devastating magnitude for the real economy can be credited to their action. It is recalled that the help given to “Wall Street” is fully and convincingly justified by the necessity to protect the real economy (“Main Street”) from the devastating consequences of a freeze of the banking system. The hyper-activism of central bankers in the ensuing protracted recovery is the result of a leader-follower type of relationship between governments and central banks. Central bankers are left with the unpalatable choice to act with suboptimal instruments in the face of the stated inability of governments to intervene. With their remaining instruments predominantly effective through the expectations channel they are tempted to overstate these instruments’ effectiveness despite the credibility risks this entails. Given the exacerbated interdependence of monetary and fiscal instruments, improvements in coordination between fiscal and monetary authorities are needed to arrive at more effective policies at the ZLB. This requires a careful review of the implementation framework for the monetary independence principle. The necessity for fiscal prudence in good times to ensure the capacity to act in crisis times is another clear lesson of recent history, of the European crisis in particular. Finally, a reinterpretation of the financial stability component of central banks mandate appears necessary. Besides addressing vigorously the Too-Big-To-Fail problem, it implies quite prosaically the willingness to adopt very conservative policies as regards the housing market. The latter is more often than not the source of an economy’s financial instability. We have all the tools, including macroprudential instruments such as the counter-cyclical capital buffer, to reach the objective. The political will should be forthcoming given the very positive cost-benefit balance of a precautionary attitude.

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