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英国论文网:British and Dutch GDP:The spread of the cri(40)


demand and rapidly rising unemployment will add domestic deflationary pressure.
The deflation will in part be offset by the improvement in the terms of trade
for the developed countries, and eventually also by fiscal measures undertaken to
boost demand. However, with the rise in food and energy prices accounting for
approximately 80% of the rise in inflation in 2007–2008 in most European countries,
the coming collapse of inflation in 2009 should have been obvious to every
central banker.
What could have been?
As late as October 21st, the central banks of Europe still had an opportunity for
credible and confidence boosting action on interest rates. A short-term rise in
global stock markets gave a window for action which would not have been seen
as a ‘too little, too late’ fire-fighting reaction to market panic. An accompanying
statement could have noted the dramatic shift in the inflation outlook. It could
have acknowledged that, in effect, monetary policy had involuntarily tightened
with falling inflation expectations raising real interest rates. Policy had already
been tightened through raised market interest rates paid by households and firms,
due to widened spreads under the credit crunch.
Would a co-ordinated 1% cut, accompanied by the promise of decisive and
timely further action in the light of rapidly evolving news, have worked to halt
the panic? Sceptics, perhaps including some in the central banks, were doubtful,
but quite wrong.
The most obvious impact of a cut would have been to raise the profit outlook of
private sector banks in every country. This would have boosted the flow of investors’
funds to the sector and raised banks’ share prices, thereby enhancing their ability to
lend and replenishing trust of depositors and in the interbank market. The result
would have greatly amplified the benefits of the earlier refinancing operation of the
ministries of finance, and lowered money market and credit spreads.
58 The First Global Financial Crisis of the 21st Century Part II
Some of the cut in policy rates would have lowered borrowing rates faced by
hard-pressed households and firms, though more gradually for some types of debt.
Where floating rate debt dominates (e.g. the UK), cash flow effects on consumer
spending are large. In research (with Janine Aron and Anthony Murphy) summarised
in my Jackson Hole paper of 2007, this effect was estimated for UK
consumption. With credit now so restricted and debt levels so high, the size of the
impact on spending of a cut in borrowing rates is larger than ever. Thus, had the
policy rate fallen, the UK might well have experienced a less severe recession than
Germany, which is far more exposed to the slump in exports of capital goods.
Currency crises in emerging markets
Another benefit would have been to ameliorate currency crises in emerging markets


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