Unconventional Monetary Policy Measures: Principles-Conditions-Raison d’etre
by Jean-Claude Trichet
Former President, European Central Bank and Honorary Governor, Bank of France
Abstract
It is always a pleasure to be in Washington, at the invitation of
the Federal Reserve Board to exchange views with so many of the
best brains that academia and central banking can offer. It is a double
pleasure and honor to participate in a colloquium celebrating
Don Kohn, who has played such a decisive role both in the Federal
Reserve System during all his career, culminating as Vice-Chairman
of the Board, and in Basel meetings and committees, where his
leadership is in all memories.
Don, seen by all your colleagues, the world over, you were
admired as the exemplary central banker, demonstrating in all
circumstances outstanding cleverness, lucidity, candor, calm, and
sangfroid. I say "in all circumstances" on purpose, because we all
have had, since mid-2007, the great privilege to experience extraordinary
demanding and difficult times-times which are characterized
by a succession of shocks that were unseen in the advanced
economies since World War II. I am convinced that these shocks
were potentially ever graver than those which triggered the 1929 crisis.
Had the central banks and the public authorities not embarked
on prompt and decisive actions, I trust that we would have experienced
not only a great recession but a dramatic, deep, and rapidly
unfolding depression.
I have been closely associated with many crises that have hit
various components of the global economy over the last thirty-five
years: the Latin America debt crisis of the 1980s, the African debt
crisis, the collapse of the Soviet Union, and the Asian crisis, to name
only a few. All continents of the world have been successively called
to drastically change their strategy, to adjust, and to go back to
sustainable policies in the fiscal, structural macroeconomics fields.
In this perspective, the fact that the advanced economies were hit in
2007-08 is less surprising. They were practically the only ones that
were spared from adjustment since World War II. In a way, it was
their turn!
Spinoza famously said, "If you want the present to be different
from the past, study the past." Indeed we are called to study the
past and to better understand what happened. This study should
apply both to the ancient past and, even more, to the very recent
past, marked, since the start of the crisis, by phenomena that
were previously unseen. A much deeper understanding of the highly
unexpected and strikingly rapid unfolding of monetary, financial,
and economic events over the last five years seems to me one of the
major preconditions for paving the way for a better future. It is
with this in view that I propose to concentrate our attention today
upon two major issues: First, on monetary policy in the crisis and
the role of so-called non-standard measures. Second, on possible new
promising avenues for economic research in light of the crisis.
Full article
(PDF, 22 pages 143 kb)
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