Changes In Central Bank Procedures During The Subprime Crisis And Their Repercussions On Monetary Theory

The subprime financial crisis has forced several North American and European central banks to take extraordinary measures and to modify some of their operational procedures. These changes have made even clearer the deficiencies and lack of realism in mainstream monetary theory, as can be found in both undergraduate textbooks and most macroeconomic models. They have also forced monetary authorities to reject publicly some of the assumptions and key features of mainstream monetary theory, fearing that, on that mistaken basis, actors in the financial markets would misrepresent and misjudge the consequences of the actions taken by the monetary authorities.

Provided by: Levy Economics Institute Topic: CXO Date Added: Aug 2010 Format: PDF

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