Central Banking With a Straight Face
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From our analysis, we found the following most relevant:
Modern societies are complex, and great expectations have been placed on public authorities. How, then, to protect central banks. To implement monetary policy effectively, they must retain the right to sell any asset they purchase be it green bonds, infrastructure bonds, mortgage-backed securities, foreign securities, or anything else
Moreover, larger financial-risk exposures (especially in bond markets) could make monetary tightening a more hazardous endeavor, with a heightened risk of policy error. Even more troublesome is that the success of balance-sheet policies has created unrealistic expectations about what central banks can achieve
The catch, here, is that most major central banks before the 2008 financial crisis had only one monetary policy instrument with which to carry out these tasks: the overnight interest rate in interbank markets
Tinbergen argued that n policy objectives require n independent policy instruments, and in the aftermath of the 2008 crisis, central banks rose to the challenge by transforming their balance sheets into a key instrument of monetary policy.