Massimo Rostagno et al.

Jul 28, 2021

Monetary Policy in Times of Crisis

A Tale of Two Decades of the European Central Bank

Oxford University Press 2021

In July 2021, nine summers after its then president saved the euro with three choice words (“whatever it takes”), the European Central Bank published the results of a thoroughgoing review of its strategy.

A policy framework built for times when inflation posed a modest upside challenge had coped – but only just – with successive financial, sovereign-debt, banking and health crises that threatened chronically weak inflation at best and deflation at worst.

Essential to the review was research conducted to mark the 20th anniversary of the ECB in 2019 and now updated and published as a book: Monetary Policy in Times of Crisis: A Tale of Two Decades of the European Central Bank (Oxford UP, 2021) by Massimo Rostagno, Carlo Altavilla, Giacomo Carboni, Wolfgang Lemke, Roberto Motto, Arthur Saint Guilhem and Jonathan Yiangou.

This exhaustive analytical history concludes that the ECB operated two policy regimes – one from 1999 to 2012 and a second crisis-informed strategy until the narrative ends before the onset of the pandemic. With its strategic review over, the history lessons from this book will be an essential guide to ECB thinking as it prepares a slow and careful unwinding of its emergency policy settings.

Massimo Rostagno has been the ECB’s Director General Monetary Policy since August 2017 and has worked at the central bank since 1998. He has served as head of the Monetary Policy Strategy Division and Director Monetary Policy and, before that, worked at the Banca d’Italia and the International Monetary Fund. He holds a PhD in economics from the University of California, Los Angeles. (Any views expressed are personal and not necessarily those of the ECB).

*The author's own book recommendations are Capital in the Twenty-First Century by Thomas Piketty (Harvard University Press, 2014) and The Populist Temptation: Economic Grievance and Political Reaction in the Modern Era by Barry Eichengreen (OUP USA, 2018).

Tim Gwynn Jones is an economic and political-risk analyst at Medley Global (Energy Aspects).

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