Show Less
You do not have access to this content

All Fall Down

Debt, Deregulation and Financial Crises

Jane D’Arista

All Fall Down traces the ways in which changes in financial structure and regulation eroded monetary control and led to historically high levels of debt relative to GDP in both developed and emerging economies. Rising stocks of debt drove the global financial system into crisis in 2008 when households, businesses, financial institutions and the public sector in some countries strained to generate sufficient income for debt service. The stagnation and fall in asset prices that followed began the process of unwinding that led to a run on the financial sector by the financial sector.
Show Summary Details
You do not have access to this content

Chapter 24: How crisis reshaped the monetary toolkit

Jane D’Arista

Extract

The Fed responded to the 2008 financial collapse by adopting new strategies and extending the range of assets it acquired. Under various programs, loans to financial institutions amounted to $1.7 trillion of which 62 percent was borrowed by 20 large banks at a mean interest rate of 0.48 percent. The Fed also began a round of asset purchases in November 2008 known as quantitative easing. By May 2013, the central bank had added $3.5 trillion to its balance sheet but it was not getting the jobs and recovery it wanted. Its decision to pay interest on reserves may have helped preserve bank capital but undermined incentives to lend. The anemic outcome of its strategies suggests that the Fed needs to reassess its countercyclical policy tools in the context of a radically changed financial system in which traditional relationship banking has been replaced by a collateralized market system.

You are not authenticated to view the full text of this chapter or article.

Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.

Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.

Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.


Further information

or login to access all content.