Ruhr Economic Papers

Ruhr Economic Papers #183

Financial Crisis, Global Liquidity and Monetary Exit Strategies

by Ansgar Belke

University of Duisburg-Essen, 04/2010, 34 S./p., 8 Euro, ISBN 978-3-86788-205-7



We develop a roadmap of how the ECB should further reduce the volume of money (money supply) and roll back credit easing in order to prevent inflation. The exits should be step-by-step rather than one-off . Communicating about the exit strategy must be an integral part of the exit strategy. Price stability should take precedence in all decisions. Due to vagabonding global liquidity, there is a strong case for globally coordinating monetary exit strategies. Given unsurmountable practical problems of coordinating exit with asymmetric country interests, however, the ECB should go ahead – perhaps joint with some Far Eastern economies. Coordination of monetary and fiscal exit would undermine ECB independence and is also technically out of reach within the euro area.

JEL-Classification: E52, E58, F42, E63

Keywords: Exit strategies; international policy coordination and transmission; open market operations; unorthodox monetary policy