Monetary Policy Efficiency and Challenges Lying Ahead in the Aftermath of the Financial Crisis

Since the 2008 financial crisis burst, central banks have had an increasing role in ensuring liquidity on financial markets, acting as lender of last resort and maintaining a general, though still fragile equilibrium. Once the interest rate cuts were no more enough to ease monetary policy, unconventional measured replaced them, generally known under the name of “quantitative easing”. Monetary policy increased in importance as governments’ latitude to conduct public and fiscal policies to sustain general demand are very limited in a context of generally high deficits and public indebtedness. This study assesses the limits and eventual risks of prolonged accommodative monetary policies deployed in developed and emerging economies throughout the world. Among the main risks, we analyse: the implications for effective balance sheet repair in advanced economies; the consequences of global monetary policy spillovers to emerging market economies; and the resulting longerterm risks for central banks, namely inflation risks.