The Low-Interest-Rate Environment, Global Liquidity Spillovers and Challenges for Monetary Policy Ahead

The impact of global banking on financial stability and the connected post-crisis challenges have been under-researched before the crisis. We interpret ‘global banking’ as ‘global central banking’, focus on the role of international monetary policies and global liquidity for financial stability and identify imponderables emerging in this context. Central banks continue to stress that they will keep interest rates low for a prolonged period, in spite of negative side effects such as deferred bank balance sheet repair. We show that it is crucial to cope with these challenges to return to and ensure global financial stability in the future.