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Book

Think Thank 20: The G-20 and Central Banks in the New World of Unconventional Monetary Policy

Brookings, 2013.

Five years after the first meeting of G-20 leaders, and decisive action by the central banks and treasuries of the world’s major economies that prevented the financial crisis of 2008-2009 from turning into a 1930’s style world-wide depression, the world economy still remains fragile. The original fiscal stimulus agreed upon in the April 3rd 2009 second leader’s level G-20 London meeting has been withdrawn in the U.S. and Europe after 2011, not through a coordinated decision of the G-20, but in response to fears of rising public debt and a political process in which these fears came to dominate the debate. In China too, fiscal policy became less expansive, after the mega-stimulus of 2009, although a mini-stimulus has been declared for the summer of 2013 to counter a greater than expected output slowdown.

Monetary policy, however, remained extraordinarily expansionary in the U.S., the U.K., Japan and the eurozone. The balance sheets of the Federal Reserve (Fed), the Bank of England (BoE), the Bank of Japan (BoJ) and the European Central Bank (ECB) expanded by $2 trillion, £310 billion, ¥50 trillion, and €1.5 trillion, respectively between December 2007 and December 2012. The Fed’s, the BoE’s, the BoJ’s and the ECB’s balance sheets were as big as 6 percent, 7 percent, 21 percent and 15 percent of their GDP in 2007, whereas in 2012, their balance sheets represented 19 percent, 27 percent, 33 percent and 32 percent of their 2012 GDP levels, respectively. Repeated rounds of quantitative easing no doubt helped the U.S. economy recover, and the actions of the ECB prevented the crisis in the eurozone periphery to spin entirely out of control.



Chapters
Think Thank 20: The G-20 and Central Banks in the New World of Unconventional Monetary Policy