
Contents
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Varieties of Financial Crises Varieties of Financial Crises
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Does the European Monetary Union Serve as a Cautionary Tale? Does the European Monetary Union Serve as a Cautionary Tale?
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The Eurozone in the Global Context The Eurozone in the Global Context
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The Pivot Toward Financial Asset Prices The Pivot Toward Financial Asset Prices
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Politics Meets Economics Politics Meets Economics
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Exiting Is Hard to Do Exiting Is Hard to Do
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The Consequences of Staying Too Easy for Too Long, Without Empathy for Others The Consequences of Staying Too Easy for Too Long, Without Empathy for Others
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Together Apart: Plus ca Change? Together Apart: Plus ca Change?
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Conclusions Conclusions
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3 The Anatomy of Financial Crises and the Role of Monetary Policy
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Published:August 2017
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Abstract
Crises come in a variety of forms. A focus on the incidence of financial crises underemphasizes the cross-border element in financial crises. How important is the exchange-rate regime in monetary policy strategies? Is the EMU experience a cautionary tale? The exchange-rate regime matters less than we think because financial globalization has conspired to effectively reduce the scope for an independent monetary policy. The EMU is unlikely to survive in its current form. Politicians seek coordinated solutions in a system that is built on policy cooperation. International coordination is only practical in emergency or crisis conditions. Cooperation is desirable only if common standards or objectives are combined with escape clauses to render them realistic. This is a goal worth pursuing. Exiting from post-GFC is a reminder that the focus on policy spillovers is misplaced. Business cycles are rarely synchronized and there cannot be a one-size fits all monetary policy.
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