Are all the Sacred Cows Dead? Implications of the Financial Crisis for Macro and Financial Policies

54 Pages Posted: 20 Apr 2016

Multiple version iconThere are 2 versions of this paper

Date Written: January 1, 2009

Abstract

The recent global financial crisis has shaken the confidence of developed and developing countries alike in the very blueprint of financial and macro policies that underlie the western capitalist systems. In an effort to contain the crisis from spreading, the authorities in the US and many European governments have taken unprecedented steps of providing extensive liquidity, giving assurances to bank depositors and creditors that include blanket guarantees, and structuring bail-out programs that include taking large ownership stakes in financial institutions, in addition to establishing programs for direct provision of credit to non-financial institutions. Emphasizing the importance of incentives and tensions between short term and longer term policy responses to crisis management, this paper draws on a large body of research evidence and country experiences to discuss the implications of the current crisis for financial and macroeconomic policies going forward.

Keywords: Debt Markets, Banks & Banking Reform, Emerging Markets, Bankruptcy and Resolution of Financial Distress, Currencies and Exchange Rates

Suggested Citation

Demirgüç-Kunt, Asli and Servén, Luis, Are all the Sacred Cows Dead? Implications of the Financial Crisis for Macro and Financial Policies (January 1, 2009). World Bank Policy Research Working Paper No. 4807, Available at SSRN: https://ssrn.com/abstract=1327276

Asli Demirgüç-Kunt (Contact Author)

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Luis Servén

CEMFI ( email )

Casado del Alisal 5
28014 Madrid
Spain

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