Institutional constraints, liquidity provision, and endogenous money in the Eurozone core and periphery before and after crises: A preliminary comparison of the Eurozone Crisis and the Coronavirus Pandemic

Nina Eichacker

PSL Quarterly Review, 2022, vol. 75, issue 303, 403-424

Abstract: This paper compares the Eurosystem's response to the Global Financial Crisis with the Coronavirus Pandemic in 2020, and argues that the European Central Bank (ECB) embraced more accommodative monetary policies within the Eurozone after 2011. Using cross-sectoral balance sheet data, it shows that ECB decisions to constrain or enable liquidity provision across the Eurozone changed between the 2008 GFC and the Coronavirus Crisis. These changes reflect Post-Keynesian theories of liquidity preference and endogenous money. Though the Eurosystem has returned to inflation targeting at the time of writing, the ECB's willingness to extend novel monetary support during past crises creates precedent for similar responses to future crises.

Keywords: Liquidity; crises; endogenous money; Eurozone (search for similar items in EconPapers)
JEL-codes: E5 E63 G01 (search for similar items in EconPapers)
Date: 2022
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