Chapter 11 Conclusion

The hard economic blow arising from the global financial crisis pushed central banks to adopt unconventional monetary policy tools. These tools were initially utilized to prevent deeper financial destabilization and bankruptcy of solvent-but-illiquid private sector balance sheets, and subsequently to address economic stagnation and deflation risks. Central banks such as the U.S. Federal Reserve Bank (Fed) and the Bank of England embarked upon huge asset purchasing programs, buying government securities as well as private securities from markets, consequently creating bank reserves on their liabilities side.

This book has provided an overview of how central bank balance sheets function in relation to the real business cycle. ...

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