Series: Occasional Papers. 1207.
Author: Ignacio Hernando, Jimena Llopis and Javier Vallés.
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Abstract
Almost four years after the collapse of Lehman Brothers, the monetary policy stance in most advanced economies remains extraordinarily loose, with policy rates close to zero and a number of non-conventional stimuli still in place. The resulting prominence of monetary policy responds, first, to the need to restore the functioning of the monetary transmission mechanism by contributing to the stabilisation of various financial market segments; and further, to the objective of stimulating economic agents´ spending decisions. This paper summarises the monetary policy measures adopted in the main advanced economies and reflects on the role played by different economic policy instruments, drawing both on the results of academic literature and on the recent positions taken by international institutions and national authorities. The paper concludes by summarising the main economic policymaking lessons to be learnt from the current crisis and it identifies issues still eliciting controversy.