LESSONS FOR MONETARY POLICY FROM THE EURO-AREA CRISIS
C.A.E. Goodhart
London School of Economics
Abstract
The earlier 2007/8 financial crisis generated the main lessons for monetary policy, notably that price stability does not necessarily guarantee financial stability. Nevertheless, the on-going Eurozone crisis has pointed to further lessons, notably that a single currency covering diverse states does need a Banking Union; and to problems of zero risk-weighting for sovereign debts. Without such a Banking Union, economic divergences between the Eurozone states have continued and look likely to persist.
Keywords: Price stability, financial stability, banking union, zero lower-bound
JEL Classifications: E52, E44, F36, G01
Acknowledgement: The views expressed are my own and do not necessarily reflect those of the London School of Economics.
Correspondence:
C.A.E Goodhart
London School of Economics
Houghton Street, London, WC2A 2AE
Tel: +44 (0)20 7955 7555
Email: c.a.goodhart@lse.ac.uk