JEL Code: H50

Gunther Schnabl; Nils Sonnenberg

Abstract

The paper analyses in light of Austrian and Keynesian economic theory the impact of conventional and unconventional monetary policies as therapies for financial crises. It compares the financial market stabilization measures of the Federal Reserve System and the European System of Central Banks in response to the US subprime crisis and the European financial and debt crisis. It is shown that the Federal Reserve System’s crisis measures were more directed towards stabilizing the banking system, whereas the European Central Bank had a stronger focus on the stabilization of the debt affordability of euro area crisis countries. In both cases, household credit growth remained under control despite renewed monetary expansion, while new imbalances emerged in the corporate sector. In the euro area, loose monetary policy had a destabilizing impact on the financial sector.

Keywords: financial crisis, Financial cycles, financial stability, Hayek, Keynes, Monetary policy.

JEL Codes: B53, E12, E14, E30, E44, E58, G10, G20, H30, H50.

Erschienen in

Working Paper, No. 166.

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Raphael Fischer; Gunther Schnabl

Abstract

Both Japan and parts of the European Monetary Union have experienced boom and bust in stock and real estate markets, which have been followed by a lasting crisis. The paper analyses the role of a high degree of regional heterogeneity for public debt and monetary policy in the context of crisis. It is shown for Japan that the attempts to maintain regional cohesion via a regional transfer mechanism has contributed to the unprecedented rise in public debt and persistent monetary expansion. Econometric estimations show that in Japan regional redistribution of funds has ensured homogeneous living conditions across Japanese regions pre- and post-crisis. The side condition is monetary expansion. A similar effect could emerge in Europe, if the crisis persists.

Keywords: EMU Crisis, Japan, Monetary policy, Public debt, Regional redistribution.

JEL Codes: H20, H50, H70.

Erschienen in

International Economics and Economic Policy (April 2018), Volume 15, Issue 2, pp 405–428.

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