Has the Global Financial Crisis Shaken the New Monetary Consensus? - A Synthetic View

The 2007-2010 Global Financial Crisis has reshuffled the cards for central bankers throughout the world. In the wake of the biggest crisis since the Great Depression, we examine the evolution of modern central banking since the inflationary chaos of the 1970s and the controversial monetarist experiments of the 1980s leading to the New Monetary Consensus that took shape in the 1990s and that prevailed until the recent crisis. We then review the limitations placed on monetary policy in the aftermath of the crisis in order to show that the global crisis has shaken the New Monetary Consensus. Finally, we address a few unavoidable issues for central banks in a post-crisis scenario