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Lessons for Europe from the 1930s. CEPS Commentaries, 21 January 2010

De Grauwe, Paul. (2010) Lessons for Europe from the 1930s. CEPS Commentaries, 21 January 2010. [Policy Paper]

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    Abstract

    Present-day central banks did not repeat the mistakes of the 1930s by tightening money in the face of a banking crisis, or by desperately trying to balance their books when the economy crashed. Yet there is one area of policy-making where authorities may not have learned the lessons of history, and are in the process of repeating the same mistakes, argues Paul De Grauwe, Senior Research Fellow at CEPS. Ultimately a central bank has to make choices. The Federal Reserve and the Bank of England chose massive programmes of liquidity creation, attaching a low weight to the possible inflationary consequences of their actions. The ECB has been more conservative in its liquidity creating programmes; attaching a low weight to the consequences for the exchange rate and to the chances of a quick recovery. Only time will tell us which of these choices was right.

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    Item Type: Policy Paper
    Subjects for non-EU documents: EU policies and themes > Policies & related activities > economic and financial affairs > monetary policy
    EU policies and themes > Policies & related activities > economic and financial affairs > Single Market > capital, goods, services, workers
    EU policies and themes > EU institutions & developments > European Central Bank
    EU policies and themes > Policies & related activities > economic and financial affairs > financial crisis 2008-on/reforms/economic governance
    Subjects for EU documents: UNSPECIFIED
    EU Series and Periodicals: UNSPECIFIED
    EU Annual Reports: UNSPECIFIED
    Series: Series > Centre for European Policy Studies (Brussels) > CEPS Commentaries
    Depositing User: Phil Wilkin
    Official EU Document: No
    Language: English
    Date Deposited: 11 Aug 2010
    Page Range: p. 2
    Last Modified: 15 Feb 2011 18:34
    URI: http://aei.pitt.edu/id/eprint/14519

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