What Have We Learned? Macroeconomic Policy After the Crisis
Back Matter

Back Matter

Author(s):
International Monetary Fund
Published Date:
May 2014
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    Contributors

    George A. Akerlof, a 2001 Nobel Laureate, is Guest Scholar at the International Monetary Fund and Daniel E. Koshland Sr. Distinguished Professor Emeritus at Berkeley.

    Sheila Bair served as Chairman of the Federal Deposit Insurance Corporation from June 2006 through June 2011.

    Lorenzo Bini Smaghi is currently a Visiting Scholar at Harvard’s Weatherhead Center for International Affairs. He was formerly a Member of the Executive Board of the European Central Bank.

    Olivier Blanchard is the Economic Counselor and Director of the Research Department at the IMF. He is also the Robert M. Solow Professor Emeritus at MIT.

    Anders Borg is a Swedish economist who serves as Minister for Finance in the Swedish government.

    Claudio Borio is Head of the Monetary and Economic Department at the Bank for International Settlements (BIS).

    Agustín Carstens is Governor of the Banco de Mexico. He is also a member of the Steering Committee of the G-20 Financial Stability Board, and the Chairman of the BIS Economic Consultative Council and the Global Economy Meeting.

    José De Gregorio is Professor at the University of Chile. He was the Governor of the Central Bank of Chile from 2007 to 2011.

    Giovanni Dell’Ariccia is Assistant Director in the Research Department of the IMF.

    Janice Eberly is the James R. and Helen D. Russell Distinguished Professor of Finance at the Kellogg School of Management at Northwestern University. She was Assistant Secretary for Economic Policy and Chief Economist at the US Treasury from 2011 to 2013.

    Stanley Fischer is currently at the Council on Foreign Relations. He was Governor of the Bank of Israel from 2005 to 2013 and First Deputy Managing Director of the IMF from 1994 to 2001.

    Andrew Haldane is Executive Director for Financial Stability at the Bank of England.

    Márcio Holland is Secretary of Economic Policy for the Brazilian Ministry of Finance since 2011 and also Professor at the São Paulo School of Economics/FGV.

    Choongsoo Kim is the Governor of the Bank of Korea and the Chairman of its Monetary Policy Committee.

    Mervyn A. King was Governor of the Bank of England from 2003 to 2013.

    Paolo Mauro is an Assistant Director in the African Department of the IMF.

    Roberto Perotti is Professor of Economics at Università Bocconi in Milan.

    Hélène Rey is Professor of Economics at London Business School.

    David Romer is the Herman Royer Professor of Political Economy at the University of California, Berkeley.

    Nouriel Roubini is Professor of Economics at New York University’s Stern School of Business and Chairman and Cofounder, Roubini Global Economics.

    Jay C. Shambaugh is Professor of Economics and International Affairs at the George Washington University.

    Jeremy C. Stein is a member of the Board of Governors of the US Federal Reserve System and has served as Professor of Economics at Harvard University.

    Joseph E. Stiglitz is University Professor at Columbia University. He was awarded the Nobel Prize in Economic Sciences in 2001.

    Duvvuri Subbarao was Governor of the Reserve Bank of India from 2008 to 2013.

    Jean Tirole is Chairman of the Foundation J. J. Laffont–Toulouse School of Economics (TSE), Chairman of the Executive Committee of the Institute for Advanced Study in Toulouse (IAST), and Scientific Director of the Institute for Industrial Economics (IDEI).

    Adair Turner is Senior Fellow at the Institute for New Economic Thinking. From 2008 to 2013 he was the Chairman of the UK Financial Services Authority (FSA).

    John Vickers is Warden of All Souls College, Oxford, and was Chairman of the UK Independent Commission on Banking 2010–2011.

    Martin Wolf is Associate Editor and Chief Economics Commentator at the Financial Times, London.

    Michael Woodford is the John Bates Clark Professor of Political Economy at Columbia University.

    Janet L. Yellen is the Vice Chair of the Board of Governors of the Federal Reserve System.

    Gang Yi is Deputy Governor of the People’s Bank of China and the administrator of the State Administration of Foreign Exchange (SAFE).

    Index

    • Asia, 272–275, 294–295

    • Asset income runs, 148

    • Asset prices, 41–42, 73, 92, 168, 309

    • Austerity measures, 202, 213, 217, 219–221, 339

    • Australia, 148

    • Automatic stabilizers, 17–18, 180–181, 185, 332, 341

    • Balance sheet recessions, 76–77, 169–173, 212, 214, 338

    • Banking. See also Financial regulation; Financial system structure

      • competition, 159

      • crises, 73, 81

      • and currency unions, 151–152, 242

      • debt flows, 275, 280

      • foreign banks, 112, 115, 282

      • investment banks, 144–147, 156–160

      • Israel, 87–90

      • Korea, 104, 112–113, 121

      • retail, 145–146, 156–157, 159–160

      • United Kingdom, 51, 66–67, 97, 159–161, 163, 324

    • Basel Committee on Banking Supervision, 131–132, 138–139, 156–157

    • Belgium, 12, 219

    • Bond ratings, 251–252

    • Brazil, 67, 292, 297–304

      • capital controls, 22, 284, 297–300, 304

      • capital flows, 284, 289

      • dollarization, 299–300

      • macroprudential measures, 290, 300, 304

      • transaction tax (IOF), 297–298

    • Bubbles, financial, 4–5, 329

      • and asset-prices, 42, 92

      • as endogenous shocks, 336

      • and private sector, 211

    • Business cycles, 72–73, 337

    • Capital account management, 265–269, 281–285. See also Capital controls; Capital flows

      • and exchange rates, 22, 281–284, 293, 298

      • foreign exchange intervention, 268–269

      • and interest rates, 284

      • liberalization strategy, 265–266, 282, 292

      • objectives, 266

      • and policy, 290

      • and regulation, 282

      • volatility, 339–340

    • Capital controls, 137–139, 218, 322

      • Brazil’s transaction tax (IOF), 297–305

      • and crises, 312

      • costs, 284–285

      • effectiveness, 282–285, 290, 292–294, 299–305

      • and exchange rates, 22, 281–284, 293, 298

      • and interest rates, 284, 291–293

      • and international financial integration, 293

      • liberalization strategy, 292

      • and macroprudential tools, 6, 21–22, 267–268, 282–283, 311

      • and monetary policy, 6

      • rationale, 291–292

      • as a stabilization tool, 267

    • Capital flows, 5–6, 307–312

      • benefits/costs, 307–309, 322

      • and current account reversals, 271–275

      • and economic growth, 279–280, 307–309

      • euro area, 254, 309

      • evidence on, 272–278, 283–284

      • and exchange rates, 271–272

      • and feedback loops, 311

      • and financial integration, 278–282, 307, 309

      • foreign direct investment (FDI), 275, 279–280, 294, 300

      • foreign exchange intervention, 268–269

      • and international reserves, 275

      • net/gross capital inflows, 271–272, 275–277, 293, 310

      • procyclicality, 310–311

      • uphill, 274–275

      • volatility, 268, 281, 294

    • Capital ratios, 324, 330

      • and banking efficiency, 131, 321–322

      • cyclical, 20–21

      • optimal, 169

      • surcharges, 131, 137–140

    • Central banks, 2–10, 37. See also European Central Bank; Inflation targeting; Macroprudential instruments; Macroprudential policy; Monetary policy

      • balance sheets, 50

      • Bank of England, 66, 97, 324

      • Bank of Israel, 87–90

      • Bank of Japan (BOJ), 215, 326

      • crisis responses, 39–40

      • and currency unions, 254

      • and exchange rates, 5–6, 44, 226

      • Federal Reserve System, 136, 289, 328

      • and financial repression, 40–41

      • and financial stability, 4–5, 60

      • and fiscal dominance, 215–216

      • independence of, 24, 44, 51–52, 70, 95–97, 324

      • and liquidity, 9–10, 12, 248

      • objectives of, 45–49

      • People’s Bank of China, 258, 260

      • and political issues, 43–44

      • and public debt, 13–15, 214

    • Chile, 283–284, 293–294

    • China, 274

      • capital account liberalization, 266

      • competitiveness, 261–262

      • exchange rate regime, 257–262

      • imports, 262

      • as optimal currency area, 257–258

    • Credit

      • creation of, 340–341

      • credit default swaps, 129, 343

      • credit flows, 310–311

      • credit-to-GDP ratio, 73–74, 317

    • Crisis of 2008–2009. See Global financial crisis

    • Currency mismatches, 100–104, 297, 310

    • Currency unions, 229–230, 239–242, 248. See also Euro area

      • and central banks, 245–254

      • disadvantages of, 253–255

      • and financial shocks, 331–332

      • and relative prices, 233–237

    • Cyprus, 237, 328

    • Debt, 10–12, 183. See also Debt contracts; Public debt

      • bail-in, 157

      • defaults, 167, 174, 248

      • deleveraging, 169–171, 338

      • and fiscal stimulus, 171–172, 186, 209–212

      • and interest rates, 12–14

      • monetization, 172–173, 217–219

      • overhang, 217–218, 325

      • rate of reduction, 15–17

      • and recovery, 337

      • restructuring, 13–15, 217

      • sustainable, 324–325

    • Debt contracts, 167–174

      • and equity contracts, 167–168

      • indexation of, 330

      • and macrofinancial stability, 166–167

    • Deflation, 169, 251

    • Denmark, 195–196, 198, 200–201

    • Derivatives, 318

    • Distribution, 341–342

    • Dodd-Frank Wall Street Reform and Consumer Protection Act, 130, 132–133, 135–136

    • Economic growth and capital flows, 279–280, 307–309

      • and debt, 209–211

      • euro area, 289

      • and exchange rates, 295

      • and financial integration, 278–280

      • and foreign direct investment (FDI), 279

      • and monetary policy, 38

    • Emerging market (EM) economies, 271–275, 295, 297, 304

      • and quantitative easing, 290

    • Employment rates, 184, 189. See also Unemployment

    • Estonia, 237

    • Euro area, 1, 15, 167, 213–214. See also European Central Bank

      • banking union, 150–151, 161–162, 332

      • capital flows, 254, 309

      • currency union, 239–241, 246–248, 253–255

      • debt ratios, 221

      • deposit insurance scheme, 151

      • economic growth in, 183–184, 220–221, 289

      • European Financial Stabilization Mechanism (EFSM), 215

      • European Stability Mechanism (ESM), 215

      • Exchange Rate Mechanism (ERM), 196

      • and financial shocks, 331–332

      • Fiscal Compact, 213

      • fiscal policy in, 183, 189–191, 195–196, 219–220

      • fiscal union, 332

      • institutional framework, 241–242, 245–246, 249–251

      • Maastricht Treaty, 150, 233–234, 245

      • and official creditors, 215–217

      • risks of, 254–255

      • and shock absorbers, 242

      • unemployment, 184, 189, 234, 239–240

    • European Central Bank (ECB), 15, 40, 215, 245, 255

      • fiscal dominance, 216

      • interventions, 249–251, 325

      • and liquidity, 248

      • Long-Term Refinancing Operation (LTRO), 249

      • Outright Monetary Transactions (OMT) program, 210, 214, 216, 249–250, 325–326

      • and public debt, 254

      • and risk premia, 250–253

      • supervisory role, 151, 242

    • Exchange rate arrangements. See also Currency unions; Euro area

      • breaking pegs, 237–239

      • currency unions, 233–237, 239–241

      • and current accounts, 234–237

      • and external adjustment, 232–237, 241, 261–262

      • fixed, 225–228, 229–233, 237–239, 258–259

      • fixed vs. floating, 225–228, 258–259

      • flexible, 225–228, 281

      • international coordination, 227–228

      • and spillovers, 227

    • Exchange rates. See also Exchange rate arrangements; Foreign exchange intervention

      • and capital controls, 22, 281–284, 293, 298

      • and capital inflows, 271–272

      • and central banks, 5–6, 44, 266

      • devaluation, 197–198, 201, 295

      • distortions, 259

      • and economic growth, 295

      • and external adjustment, 232–233

      • and fiscal consolidation, 196–197

      • floating, 230–237, 259, 260

      • and interest rates, 290

      • and shocks, 230–232

      • volatility, 268–269

    • Financial crises, 76–77, 169–173, 212, 317–318, 338

    • Financial cycles, 71–86

      • and balance sheet recessions, 76–77

      • and banking crises, 73, 78

      • and business cycle, 72–73, 322

      • credit and asset-price cycle, 168

      • defined, 71, 76

      • and macroprudential policy, 77–82

      • and output gap, 74–76

      • procyclicality, 310–311

    • Financial integration and growth, 278–282, 307, 309

    • Financial Policy Committee (FPC), 66–67

    • Financial regulation, 129, 321–322, 340. See also Financial system structure

      • and bail-in debt, 157

      • and bailouts, 136, 149

      • capital ratios, 20–21, 51, 67, 131, 137–140, 156–157, 159, 163, 169, 321–322, 324, 330–331, 340

      • dynamic provisioning, 20–21

      • and European banking union, 150–151

      • insulation strategy, 147

      • leverage caps, 106–107, 110, 112, 114–117, 131, 156

      • and Liikanen report (2012), 130, 155, 161–163

      • liquidity ratios, 149–150

      • and macroprudential instruments, 19–22

      • Net Stable Funding Ratio (NSFR), 149

      • and network analysis, 78–79

      • Orderly Liquidation Authority (OLA), 135–136

      • rationale, 143

      • reform of, 129–134, 148–151, 115–163, 330–331

      • representation hypothesis, 143–144

      • resolution processes, 132, 135–136, 145, 148, 151, 156–157

      • ring-fencing, 130, 145, 155–163, 282

      • risk weights, 131–132, 156, 162

      • and shadow banking, 146–147

      • size caps, 137–139

      • stress testing, 66, 77–78, 311

      • and Systemically Important Financial Institutions (SIFIs), 135–140, 144, 147

      • and systemic risk, 132, 144, 146

      • and Too-Big-To-Fail (TBTF) problem, 132, 135–136, 140, 340

      • types of, 133–134

      • Vickers rule, 130, 145, 147

      • Volker rule, 130

    • Financial stability. See also Financial regulation; Macroprudential policy

      • and automatic stabilizers, 180–181, 185, 332, 341

      • and capital flows, 283

      • and debt contracts, 156–174, 331

      • and interest rates, 329

      • and liberalization, 339–340

      • and macroprudential policies, 329–330

      • and shocks, 327–330

      • stabilization tools, 183, 186, 267–268

    • Financial system structure

      • Britain, 159–161

      • Europe, 161–163

      • Glass-Steagall prohibition, 158, 161

      • Liikanen report (2012), 130, 155, 161–163

      • reform of, 130, 144–148, 155–163, 282, 330–331

      • shadow banking system, 130, 146–147

      • US, 158–161

      • Vickers rule, 130, 145, 147

      • vision, 129–130

      • Volcker rule, 155, 158–161

    • Finland, 195, 197–201, 203

    • Fiscal consolidation, 10, 14–17, 172, 180–181, 193–203. See also Fiscal policy; Public debt

      • and exchange rates, 196–197

      • expansionary consolidations, 15, 193–203, 212–213

      • front-loaded, 217, 219–221

      • and income policies, 197–198, 201

      • and interest rates, 200–201

      • and monetary policy, 214–216

      • and official creditors, 215, 217–218

      • optimal pace of, 15–17, 181, 218–219, 324

      • and public debt, 10–12, 15–17, 172

      • and recovery, 198–201

      • spending-based/tax-based, 194–196, 201–202

    • Fiscal policy, 10–18, 179–191, 193–205, 209–221. See also Fiscal consolidation; Public debt

      • automatic stabilizers, 17–18, 180–181, 185, 332, 341

      • and balance sheet recessions, 212, 214

      • and booms, 82

      • credibility of, 186, 188–189

      • and credit policy, 182

      • and currency unions, 241

      • cyclical adjustment, 203

      • deficits, 170–172, 233–234

      • difficulties of, 187–188

      • and euro area, 219–220

      • and financial cycles, 80–81

      • fiscal councils, 203–204

      • fiscal rules, 16–17, 180–181, 332–333

      • fiscal space, 185–186, 193, 214–215, 332

      • and fixed exchange rates, 226

      • government spending, 187–188, 203–204

      • and inflation, 13–15

      • and liquidity trap, 213

      • and market confidence, 185

      • and monetary policy, 187, 191, 211, 214, 344

      • money-financed stimulus, 172–173

      • and moral hazard, 216–217

      • multipliers, 15–16, 172, 180, 204, 212–213, 319

      • objectives, 186

      • stimulus, 170–173, 183–191, 202–203, 212–214, 319–320, 336–339

      • and structural public finances, 189–191

      • and structural reforms, 187, 220–221, 338

      • taxes, 17–18, 204–205

      • and wealth redistribution, 218

      • at zero lower bound, 204

    • Foreign banks, 112, 115, 282

    • Foreign direct investment (FDI), 275, 279–280, 294, 300, 303

    • Foreign exchange intervention, 6, 22

      • capital account management, 268–269

      • Korea, 99–100, 106, 108, 110–112, 121

      • as macroprudential instrument, 97–98

    • Forward guidance, 8, 57–59

    • France, 155, 185, 219

    • Germany, 16, 73, 155, 254

      • debt, 248

      • fiscal policy in, 185–186, 220

      • and market discipline, 216

      • structural reforms, 221

    • Global financial crisis, 55–56, 59–60, 165, 179, 289, 329

      • and derivatives, 318

      • and exchange rate regimes, 229

      • response to, 169–170, 318–320, 329–330

    • Great Depression, 50, 166, 212, 318, 337

    • Great Moderation, 4, 46–47

    • Greece, 50, 211, 219, 329

    • Housing market

      • Israel, 91–95, 97

      • Korea, 99–101, 105–107, 109–110, 114, 121–123

    • Iceland, 11, 212, 230–231, 312, 328

    • Independent Commission on Banking (ICB), 159–160

    • India, 67, 265–267

    • Indonesia, 273

    • Inflation. See also Inflation targeting

      • and asset-price bubbles, 42, 227, 309

      • and debt reduction, 13, 218

      • expectations, 326

      • as indicator, 76

      • models of, 41–42

      • and output gap, 3–4, 45–49

      • and wealth redistribution, 40

    • Inflation targeting, 2–7, 31–34, 197, 322–323. See also Monetary policy

      • activity target, 2–4

      • assigning instruments, 2–6, 32–34, 38

      • communications, 32

      • employment target, 31–32

      • exchange rate target, 5–6

      • and financial cycle, 76

      • financial stability target, 4–5, 60–61

      • flexible, 56–59, 96

      • and growth, 38

      • nominal GDP target, 8–9, 57–61, 173, 332

    • Interest rates. See also Inflation targeting; Monetary policy

      • and asset-price bubbles, 42

      • and capital controls, 284, 291–293

      • and ECB policy, 249–251

      • and exchange rates, 290

      • and financial stability, 329

      • and fiscal consolidation, 200–201

      • and fiscal policy, 43, 211

      • international, 297

    • International liquidity, 295–297

    • International Monetary Fund (IMF), 215, 258, 291

    • International reserves, 275–278

    • Ireland, 170, 212, 214

      • banking system rescue, 11

      • capital flows, 309

      • exchange rate arrangement, 230–231

      • fiscal consolidation in, 195–201

      • unemployment, 230

      • wage agreement, 198, 201

    • Israel, 67, 87–98, 230

      • Bank of Israel, 87–90

      • capital inflows, 94–95

      • central bank independence, 95–97

      • DTI ratios, 92

      • economic growth, 94–95

      • Financial Stability Committee (FSC), 89–90

      • housing market, 91–95, 97

      • Israeli Securities Authority (ISA), 89

      • mortgage limits, 92–94

    • Italy, 12, 16, 249, 325

      • debt, 210–211, 214

      • fiscal policy, 185

    • Japan, 8, 169–170, 172–173, 190, 204

      • Bank of Japan (BOJ), 215, 326

      • debt levels, 12–13

      • interest rates, 215

    • Korea, 67, 99–125

      • banking, 104, 112–113, 121

      • capital flows, 100–102, 104, 283

      • currency/maturity mismatches, 100–104

      • current account deficit, 273

      • foreign exchange-related measures, 99–100, 106, 108, 110–112, 121

      • housing market, 99–101, 105–107, 109–110, 114, 117–123

      • LTV/DTI ratios, 105–106, 114–115, 117–118, 121–123

    • Latin America, 272–275, 280–282, 294–295

    • Leverage, 168–174, 341–342

    • Liikanen report (2012), 130, 155, 161–163

    • Liquidity

      • and bad equilibria, 210–211, 248

      • and central banks, 9–10, 12, 248

      • international, 295–297

      • Liquidity Coverage Ratio (LCR), 149

      • regulation, 149–150

    • Liquidity trap, 7–8

    • Macroprudential instruments, 4–5, 18–24, 323

      • calibration/activation, 82

      • and capital controls, 6, 21–22, 267–268, 282–283, 311

      • cyclical capital ratios and dynamic provisioning, 20–21, 97

      • effectiveness of, 20–22, 79–80, 109–121

      • and foreign exchange intervention, 97–98

      • foreign exchange-related measures, 106, 108, 110–112, 114–117

      • LTVs/DTIs, 21, 67–69, 79–80, 92–94, 105–107, 109–110, 114–115, 117–123

      • macroprudential stability levy (MSL), 106, 108, 110–112, 114–117

      • price-based/quantity-based, 67–68

      • types of, 19–20

    • Macroprudential policy, 2, 4–5, 18–24, 52, 65–70, 79–81, 95–96, 322–324. See also Financial stability

      • Brazil, 290, 300, 304

      • definition, 97

      • distributional effects of, 96

      • effectiveness of, 20–22, 79–80, 109–121, 323

      • and financial cycle, 77–82

      • Hong Kong SAR, 67

      • institutional arrangements, 19, 22–24, 66–69, 324

      • and microprudential regulation, 19, 323–324

      • and monetary policy, 22–24, 65, 67–68, 80, 96–97, 322–324

      • and network analysis, 78–79

      • objectives, 65–66, 97

      • and political economy, 80

      • and regulatory perimeter, 20

      • and sovereign risk, 80–81

      • and stress testing, 77–78

    • Malaysia, 273, 293

    • Maturity mismatches, 100–104

    • Mexico, 228, 272–273

    • Microprudential regulation, 19, 324, 329

    • Modigliani-Miller theorem, 340

    • Monetary policy, 2–10, 179. See also Central banks; Inflation targeting

      • and activity target, 2–4

      • and agents’ behavior, 39–41

      • announcement effects, 325–326

      • and balance sheet recessions, 169–170

      • and bubbles, 4–5, 41–42

      • and capital flows, 5–6, 311

      • credibility, 8

      • and credit, 181–182, 340

      • and debt monetization, 172–173, 217–219

      • distributional effects, 95–96

      • and “divine coincidence,” 2–4

      • and exchange rate, 5–6, 44

      • and financial intermediation, 166

      • and financial market segmentation, 7–8, 40

      • and financial repression, 14, 40–41

      • and financial stability, 4–5, 23, 33–34, 42, 48–49, 52, 60–61, 171, 322–323

      • and fiscal dominance, 13–15, 215–216

      • and fiscal policy, 13–15, 43, 187, 191, 344

      • and fixed exchange rates, 226

      • and foreign exchange intervention, 6, 22

      • forward guidance, 8, 32–33, 57–59

      • and growth, 38

      • and imbalances, 18

      • instruments, 6–8, 49–52, 342–344

      • and interest rates, 96, 171, 342–343

      • lean option, 80–82

      • limits, 38–44, 51

      • and liquidity trap, 7–8

      • and macroprudential policy, 7, 22–24, 34, 65, 67–68, 80–81, 96–97, 324

      • mandates, 66, 68

      • and Minsky-Taylor frontier, 48–49

      • models, 38–39, 41–42

      • objectives, 42, 45–49

      • policy rate, 2, 4, 6–7, 22, 58, 167, 170, 329

      • price level target, 8–9

      • quantitative easing, 7–8, 33–34, 215, 290, 295–297

      • and rational expectations, 39

      • reaction function, 58

      • and redistribution, 43–44

      • targets, 2–6, 55–61

      • and Taylor frontier, 46, 48

      • transmission mechanism, 91–92

      • unconventional, 7–9, 39–43, 59, 171

      • and zero lower bound, 7–9, 51–52, 57–59

    • Moral hazard, 9, 211, 216–217

    • Mortgage lending

      • and derivatives, 318

      • Israel, 94

      • Korea, 109–110, 114, 117–123

      • securitization, 133–134

    • Multiple equilibria, 12, 210–211, 248, 325–326

    • Output gap, 181

      • and financial cycle, 74–75

      • and inflation, 3–4, 45–49

    • Outright Monetary Transactions (OMT) program, 210, 214, 216, 249–250, 325–326

    • Over-the-counter (OTC) markets, 147

    • Poland, 230

    • Portugal, 11

    • Potential output, 181

    • Public debt. See also Fiscal consolidation; Fiscal policy

      • causes of high debt, 211–212

      • and central banks, 13–15, 214, 325

      • contingent liabilities, 11

      • and ECB, 249, 254

      • and financial repression, 40–41

      • high levels, 9–12, 170–172, 179–180, 186, 209–212, 217–218, 246–248

      • and inflation, 218

      • and interest rates, 246–248

      • monetization, 172–173, 217–218

      • and multiple equilibria, 11–12, 210–211, 248, 325

      • optimal reduction rate, 15–17

      • overhang, 217–218, 325

      • restructuring, 13–15, 217

    • Quantitative easing, 7–8, 215, 290

    • Recessions, 76–77, 169–173, 212, 317–319, 338

    • Reforms, 339–341

      • financial regulation, 148–150, 330–331

      • flawed models, 341–342

    • Riksbank, 8

    • Securitization of mortgages, 133–134

    • Shadow banking system, 130, 146–147

    • Slovak Republic, 237

    • Slovenia, 237

    • Spain, 170, 185, 210–212

      • bond ratings, 251–252, 325

      • capital flows, 309

      • debt, 249, 251, 253

      • fiscal policy, 16, 219

      • interest rates, 12, 246–248, 250–251

      • unemployment, 214

    • Spillovers, 136

    • Stabilization tools, 183, 186, 267–268

    • Sweden, 8, 183, 185, 230

      • fiscal consolidation in, 195–200

      • government spending, 203

      • indexed expenditures, 187

    • Switzerland, 73

    • Systemically important financial institutions (SIFIs), 135–140, 144, 147

      • bailouts, 136

      • capital surcharges, 137–140

      • corporate governance, 140

      • senior debt requirements, 137

      • size caps, 137–139

      • spillovers, 136

    • Targeted easing, 7–8

    • Thailand, 273, 293

    • Too-Big-to-Fail problem, 132, 135–136, 340

    • Unemployment, 96, 181, 214

      • euro area, 184, 189, 234, 239–240

      • Iceland, 230

      • Ireland, 230

      • natural rate of, 3, 189

      • and recovery, 336, 338

      • United States, 184, 189, 240

    • United Kingdom, 24, 170, 185, 230

      • austerity measures, 213, 219

      • banking capitalization, 51, 67

      • banking reform, 159–161, 163

      • Bank of England, 66, 97, 324

      • bond ratings, 251–252, 325

      • debt, 253

      • Financial Policy Committee, 19, 51, 66, 97, 324

      • interest rates, 246–248, 251

      • macroprudential mandate, 66–67

      • price-based instruments, 67

      • price stability, 46

      • private sector bubbles, 212

      • ring-fencing, 155

    • United States, 170

      • automatic stabilizers, 180–181

      • banking reform, 158–159, 161, 163

      • current account deficits, 274

      • debt levels, 13

      • and euro area, 310

      • financial/business cycles, 72–73

      • financial shocks, 328

      • fiscal policy in, 183, 213, 219

      • fiscal stimulus of 2009, 213

      • output gaps, 74–76

      • private sector bubbles, 212

      • recovery, 318

      • safe haven, 12

      • stress tests, 66

      • structural transformation, 338–339

      • unemployment, 184, 189, 240

    • Unit labor costs, 196–197

    • US Federal Open Market Committee (FOMC), 58–59

    • Vickers rule, 145–147

    • Volcker rule, 155, 158–161

    • Wage adjustments and recoveries, 198, 337–338

    • Zero lower bound (ZLB), 167

      • and government spending, 204

      • and monetary policy, 7–9, 51–52, 57–59

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