The Great Recession shook not only the global economy and the financial systems of major economies, but also conventional wisdom of economic policy making, regulation of financial markets, and more. Following the collapse of Lehman Brothers in September 2008, governments and central banks acted on an unprecedented scope and scale. The policy response was unique in the variety of the measures taken, including some that had so far been almost unthinkable. Examples include unconventional monetary policy, interventions in financial markets, exchange rate intervention, and a renewed debate on capit ... More

The Great Recession shook not only the global economy and the financial systems of major economies, but also conventional wisdom of economic policy making, regulation of financial markets, and more. Following the collapse of Lehman Brothers in September 2008, governments and central banks acted on an unprecedented scope and scale. The policy response was unique in the variety of the measures taken, including some that had so far been almost unthinkable. Examples include unconventional monetary policy, interventions in financial markets, exchange rate intervention, and a renewed debate on capital controls. Preventive policies for reducing the risk of a crisis were also reconsidered, notably macroprudential policies, and stronger regulation of financial markets and institutions. The volume is policy oriented and presents the experience of various countries − advanced economies and emerging ones, countries that were hard-hit by the crisis and countries that weathered it successfully. The focus on central banks reflects the important role they played during the crisis, and the role that they might play in preventing or preparing for future crises. The chapters cover primarily monetary policy, macroprudential policy, and issues of exchange rates, capital flows, banking and financial markets as these relate to the crisis and its lessons. They also highlight the interactions among these dimensions, as the need for integration among policy areas is one of the important lessons of the crisis. This calls for closer cooperation and coordination between the various policy makers and regulators.