Ever since the financial crisis we've seen a paradigm shift in central banking. It used to be the case that central banks operated mostly in the shadows, attempting not to reveal their intentions while managing reserves in the banking system to achieve their respective short-rate targets. All that has changed in recent years as central banks around the world hit the zero bound and fumbled to find additional measures they could take to improve liquidity.
From creating emergency credit facilities to taking partial ownership of public companies to quantitative easing to paying interest on reserves, and now possibly setting negative interest rates, the list of "new" tools is long and encompassing. The latest evolution involves forward guidance designed to move exchange rates.
It was once taboo for central bankers to openly discuss such things as exchange rate targeting. In fact just over a year ago the ECB reprimanded Japanese officials for what they ... Log in or subscribe to continue reading.
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