Abstract
There is a growing tension in policy objectives. While unemployment rates are returning to long-term norms, inflation is undershooting policy objectives most notably in Europe and Japan. This has encouraged global monetary policy to err on the side of an accommodative stance, on the grounds of being the lowest-risk outcome. The cost of a policy mistake from preemptive tightening — deflation — is much greater than a potential overshooting of inflation from too long a period of low interest rates. High debt ratios and lower nominal income trends risk a lasting negative feedback loop through lower expected returns, larger pension gaps, higher saving rates, lower capital demand, and tighter credit conditions.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
Similar content being viewed by others
References
Bank of China (2014). “2014 Interim Results Announcement.” Beijing, China, 20 August.
Bank of International Settlements (2013). “GHOS endorses revised liquidity standard for banks.” Basel, Switzerland: BIS, 6 January.
Bank of International Settlements (2014). “Asset Managers in Emerging Market Economies.” Basel, Switzerland: BIS, 14 September.
Bernanke, B. (2012). “Monetary Policy since the Onset of the Crisis.” Federal Reserve Bank of Kansas City Economic Symposium, Wyoming. August.
Blackrock (2013). “Exchange Traded Products: Overview, Benefits and Myths.” Viewpoint Series. June.
Blackrock (2014). “The Liquidity Challenge: Exploring and Exploiting (Il) liquidity.” Blackrock Investment Institute. June.
Craig, S., Hua, C., Ng, P., and Yuen, R. (2013). Development of the Renminbi market in Hong Kong SAR: Assessing Onshore-Offshore Market Integration, International Monetary Fund Working Paper 13/268. December.
Feroli, M., Kashyap, A., Schoenholtz, K., and Shin, H.S. (2014). Market Tantrums and Monetary Policy, The Initiative on Global Markets Working Paper No. 101. February.
Financial Crisis Inquiry Commission (2011). “Financial Crisis Inquiry Report,” US Government Printing Office.
Gordon, G. B. (2012). Misunderstanding Financial Crises: Why We Don’t See Them Coming. Oxford: Oxford University Press.
International Monetary Fund (2014). “Global Financial Stability Review.” Washington: International Monetary Fund. April.
Oliver, Wyman (2012). OTC Derivatives Clearing: Perspectives on the Regulatory Landscape and Considerations for Policymakers. Marsh & McLennan Companies. May.
Poterba, J. and Shoven, J. (2002). Exchange Traded Funds: A New Investment Option for Taxable Investors, National Bureau of Economic Research Working Paper No. 8781. February.
Ramaswamy, S. (2011). Market Structures and Systemic Risks of Exchange-traded Funds, Bank of International Settlements Working Paper No. 343. April.
Riksbank (2013). “Minutes of the meeting of the Council for Cooperation on Macroprudential Policy held on 1 October 2013.” Stockholm, Sweden: Financial Stability Committee. October.
Riksbank (2014). “Financial Stability Report 2014:2.” Stockholm, Sweden: Riskbank. December.
Shin, H.S. (2013). “The Second Phase of Global Liquidity and Its Impact on Emerging Economies.” Federal Reserve Bank of San Francisco Asia Economic Policy Conference, November.
Singh, M. and Stella, P. (2012). Money and Collateral, International Monetary Fund Working Paper 12/95. April.
Stein, J.C. (2013). “Overheating in Credit Markets: Origins, Measurement, and Policy Responses.” Federal Reserve Bank of St. Louis Research Symposium. February.
UBS (2014). “China Banks: Is This Time Different?” Hong Kong. January. Yellen, J. (2013). Interconnectedness and Systemic Risk: Lessons from the Financial Crisis and Policy Implications. Washington, DC: US Federal Reserve Board. January.
Editor information
Editors and Affiliations
Copyright information
© 2015 Marcel Kasumovich
About this chapter
Cite this chapter
Kasumovich, M. (2015). Chasing the Tail of Financial Stability? Solutions to the Last Crisis Are the Seeds for the Next One. In: Thomakos, D.D., Monokroussos, P., Nikolopoulos, K.I. (eds) A Financial Crisis Manual. Palgrave Macmillan Studies in Banking and Financial Institutions. Palgrave Macmillan, London. https://doi.org/10.1057/9781137448309_6
Download citation
DOI: https://doi.org/10.1057/9781137448309_6
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-137-44829-3
Online ISBN: 978-1-137-44830-9
eBook Packages: Palgrave Economics & Finance CollectionEconomics and Finance (R0)