Document Type
Article
JEL Codes
E5, E58, G10, G20
Abstract
Central banks may engage in large-scale lending and asset purchases to stabilize financial markets and implement monetary policy during crises. The ability of these actions to restore financial market functioning is well documented; however, they come with costs. We provide a literature review of the costs associated with these post-Global Financial Crisis central bank actions, without commenting on the net benefits they provide. We find support for the premise that crisis actions may negatively impact market liquidity, distort asset prices, increase rent-seeking and inefficient uses of the liquidity provided by the central bank, create international spillovers, and create distortions in the consolidated government balance sheet. We discuss measures that may mitigate the negative impacts of crisis actions.
Recommended Citation
Aldridge, Patrick; Cimon, David A.; and Vala, Rishi
(2025)
"Central Bank Crisis Interventions: A Review of the Recent Literature on Potential Costs,"
Journal of Financial Crises: Vol. 7
:
Iss. 4, 1-26.
DOI: https://doi.org/10.17132/2693-3179.1645
Available at:
https://elischolar.library.yale.edu/journal-of-financial-crises/vol7/iss4/1
Included in
Finance Commons, Macroeconomics Commons, Political Economy Commons