After the Financial Crisis
Edited by Sylvester Eijffinger and Donato Masciandaro
Chapter 2: Monetary Policy Lessons from the Crisis
Athanasios Orphanides1 Introduction The assignment I accepted for this chapter is not straightforward. The task is to provide a policymaker’s perspective on some lessons from the great ﬁnancial crisis for monetary policy. Having studied earlier challenging episodes in monetary history, I am well aware of the pitfalls of attempting to draw lessons from a crisis while the experience is still raw. Better to wait a decade or more, to have time to evaluate with greater clarity whether, how and under what conditions things could have evolved diﬀerently. On the other hand, there is no time to waste on suggested improvements in the policy framework if the objective is to improve the odds of better outcomes for the future. What better opportunity to oﬀer some early thoughts on the lessons, then, than the occasion presented by this colloquium honouring Lucas Papademos, taking place right after the last meeting of the Governing Council of the European Central Bank (ECB), before the end of his tenure as Vice-President of this institution. I focus on questions in three areas. First, what lessons can be drawn regarding the institutional framework for monetary policy? Has the experience changed the pre-crisis consensus that monetary policy is best performed by an independent central bank focused on achieving and maintaining price stability? 1 Prepared for The great ﬁnancial crisis: lessons for ﬁnancial stability and monetary policy: colloquium in honour of Lucas D. Papademos, Frankfurt, 20–21 May 2010. I would like to thank Gregory Hess, Lucrezia Reichlin...
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