Monetary Policy in Difficult Times: Lessons and Challenges from the European Central Bank Experience

01  December 2010    4:00 pm

Lucrezia Reichlin, London Business School


Oesterreichische Nationalbank, Otto-Wagner-Platz 3, 1090 Vienna, Kassensaal, first floor


The talk will discuss the ECB’s monetary policy response to the recent financial crisis, in particular liquidity policymaking after the collapse of Lehman Brothers in September 2008. Prof. Reichlin proposes an empirical framework to quantify the effect that the ECB’s policy of compressing large interest spreads between secured and unsecured interest rates has had on the economy. Moreover, she will explore why important parts of the monetary policy transmission mechanism have remained similar to that during the precrisis years, and she will analyse nonstandard policies. In this respect, Prof. Reichlin suggests that the ECB’s 'nonstandard'’ policy had a monetary and a financial stability objective, both of which have up to now been complementary. At the same time, the experience with nonstandard policy also raises challenges both for the theory and the practice of monetary policy. The talk is based on a series of papers coauthored (in different composition) with Domenico Giannone (Université Libre de Bruxelles), Michele Lenza (ECB) and Huw Pill (ECB).