Economics, Econometrics and Finance
6 years ago

Central banks prioritize financial stability over independence during economic crises.

Proceedings of the ... International Conference on Business Excellence
Central Bank Independence and economic crises: how both the fed and ECB managed to rely on unconventional monetary policies
Mădălina Doroftei, Alexandru Pătruţi

Paper Summary

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Central banks like the Fed and ECB used unconventional monetary policies during the 2009 global crisis to protect their economies, even though central bank independence was thought to be crucial. They introduced measures like quantitative easing and negative interest rates to stabilize the financial system. Now, central banks are also responsible for preventing future economic crises by using monetary policy. This shows that in times of economic downturn, central bank independence may not be as important as ensuring financial stability.