Central Banks and Financial Markets

Central Banks and Financial Markets

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A”Hasan CAimertA•s timely book reaches us during the prolonged conditions of the global great recession. By providing a thorough and detailed econometric analysis of the institutional and historical developments of the hegemonic leader of capitalism, CAimert reveals that the simplistic monetary policy tools of the central banks of the so-called A’modern great moderationA“ era are over, and we are now at cross-roads of a paradigmatic shift. CAimertA•s book suggests itself as one of the first leading examples of this shift.A• A Erini Yeldan, Yasar University, Turkey A”This provocative book shows that the Federal Reserve has, in the last four decades, gradually lost influence over credit and financial markets. This argument, supported by institutional analysis and econometric tests, has two explosive implications: first, Federal Reserve policy did not cause the subprime crisis; second, central banks no longer have instruments for intervening in economies whose growth they are now expected to restore. Anyone concerned with the future of global capitalism should consider ComertA•s work as a matter of urgency.A• A Gary Dymski, Leeds University Business School, UK and University of California, Riverside, US A”Prior to the outbreak of the financial crisis in 2008, mainstream economists celebrated a A’New ConsensusA“ on monetary policy in which independent central banks were assumed able to bring about a A’Great ModerationA“ of low inflation and high economic growth by manipulating short-term interest rates. In this important and interesting book, Hasan CAimert demonstrates convincingly, through institutional analysis and econometrics, that central banks lost control of the price and quantity of credit starting two decades before this celebration. He shows that central banks themselves, through their support of financial market deregulation and globalization, helped bring about both monetary policy impotence and the global crisis. ItA•s a must-read.A• A James Crotty, University of Massachusetts, Amherst, US In the wake of the financial crisis of 2008, there has been increasing debate over the appropriate role of central banks in mitigating economic disaster. This timely volume combines detailed historical and econometric analyses to explore the profound changes that occurred within the US financial system from the 1980s to the present, and shows how these changes have affected the US economy. Hasan CAimert demonstrates how dramatic shifts in the financial system undermined the ability of the US Federal Reserve to control the price and quantity of credit. He identifies several key factors that facilitated this loss of control, including deregulation, rapid financial innovations, increased financial integration and a number of policy decisions implemented within the Federal Reserve itself. Through a combination of several methods, including historical and institutional analyses, descriptive statistics, simulation and econometric techniques, the author provides a well-rounded and vitally important picture of the US financial system and offers insightful policy recommendations for the future. Students, professors and policymakers with an interest in economics, finance, banking and monetary policy will no doubt find this book a fascinating and invaluable resource.First, as Tobina#39;s q suggests, monetary policy can influence investment decisions via its impact on stock prices. ... This idea is based on Keynesa#39; famous statement in the General Theory: [T]he Stock Exchange revalues many investments every day and the ... For him, monetary policy is one of the major factors influencing q.

Title:Central Banks and Financial Markets
Author: Hasan C”mert
Publisher:Edward Elgar Publishing - 2013

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