Financial Crisis, Global Liquidity and Monetary Exit Strategies

Ansgar Belke

No 995, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: We develop a roadmap of how the ECB should further reduce the volume of money (money supply) and roll back credit easing in order to prevent inflation. The exits should be step-by-step rather than one-off. Communicating about the exit strategy must be an integral part of the exit strategy. Price stability should take precedence in all decisions. Due to vagabonding global liquidity, there is a strong case for globally coordinating monetary exit strategies. Given unsurmountable practical problems of coordinating exit with asymmetric country interests, however, the ECB should go ahead - perhaps joint with some Far Eastern economies. Coordination of monetary and fiscal exit would undermine ECB independence and is also technically out of reach within the euro area.

Keywords: Exit strategies; international policy coordination and transmission; open market operations; unorthodox monetary policy (search for similar items in EconPapers)
JEL-codes: E52 E58 E63 F42 (search for similar items in EconPapers)
Pages: 34 p.
Date: 2010
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:diw:diwwpp:dp995

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