William R. White

Whither Monetary and Financial Stability? The Implications of Evolving Policy Regimes

This paper was presented at the Federal Reserve Bank of Kansas Citys Symposium on Monetary Policy and Uncertainty: Adapting to a Changing Economy at Jackson Hole, Wyoming on 28-30 August 2003. The views expressed are those of the authors and do not necessarily reflect those of the BIS.

Procyclicality in the Financial System: Do We Need a New Macrofinancial Stabilisation Framework?

The successful pursuit of the objective of low inflation by central banks in recent decades has also delivered low variability of both inflation and output. At the same time, numerous financial and other imbalances (defined here as significant and sustained deviations from historical norms) have emerged. Should these imbalances revert to the mean, there could be significant effects on output growth. Although such an adverse outcome remains only a possibility, the question asked in this paper is whether we might still benefit from a new macrofinancial stabilisation framework in which monetary and regulatory policies gave more attention to avoiding the emergence of imbalances in the first place.

How False Beliefs About Exchange Rate Systems Threaten Global Growth and the Existence of the Eurozone

The current belief system that says “all will be well” if domestic price stability can be maintained is fundamentally flawed. If this can be achieved only through monetary, credit and debt expansion, the end result will be an increased risk of systemic crisis. Moreover, false beliefs about how exchange rate systems function, at both the global level and within the Eurozone, imply international “spillover” effects that increase both the likelihood and the seriousness of such crises. Gross international capital flows pose as many (perhaps more) dangers than do net flows (ie current account imbalances). And false beliefs about exchange rate regimes not only compromise crisis prevention, but they also hinder crisis management and resolution. At the global level, we still lack the instruments to do either effectively should current problems worsen. In the Eurozone, the crisis which began in 2010 has not been well managed and remains fundamentally unresolved.