Financial instability and the role of central banks and monetary policy

Financial instability has been at the core of post-Keynesian macroeconomics and monetary theory for several decades now, although the topic has certainly gained more prominence since the 2007–2008 financial crisis, especially among some in the mainstream when ‘it’ seemed to have happened again. There can be no doubt that economies have become generally more fragile and unstable since the rise of neoliberal policies, circa 1980, when privatisation and deregulation became the policy ordre du jour . Moreover, over the last two millennia, crises have become more frequent and more intense. These crises are systemic, which means that they affect everybody, increasing macroeconomic vulnerabilities. The chapters in this book concern themselves with monetary policy and instability, and the role central banks play. They deal with many aspects of the current financialised capitalist system that contribute to increased instability, such as the rise of global shadow banks, pension funds and overall market concentration. While the focus is on the US financial market, there are also analyses for the G7 and for developing countries.