Post-GFC how have major central banks been conducting monetary policy to achieve their objectives?

Expert Solution

Post great financial crisis Central banks, all across the world have started to adopt proactive monetary policy in order to estimate the the cycles of economy so that their monetary policy can forecast the economic direction and they could formulate the economic policy in advance so that they can help themselves avoid the risk of recession and maintain the financial stability all across the economy.

Financial crisis can also be attributed to a lot of mishandling of monetary policy by the central bank's so that led to a widespread global financial crisis and after the financial crisis there has been change in the approach of how the global Central Bank started to work as they have been adopting all the monetary tools and they have been continuously reviewing their monetary policy at constant intervals and those monetary policy are just not in synchronisation with the current economic policy but they are also estimating the future economy so they are proactively trying to discount any kind of economic adversity and they are preparing the monetary policy in accordance with those changes in economy and it can be said that Central Bank all across the world have become more conscious and more forecasting along with they have been more supportive and they have provided liberalized policies in order to support the economy and stimulate the economy growth so that they can help the economy in order to survive and sustain through economic adversities.

The recent example can be derived when the Federal Reserve in 2020 after expectation of an impending recession but its interest rate to almost the negative zones because it felt that it needed to stimulate the economy in advance as there was a high risk due to the pandemic of coronavirus which was adversely impacting the growth of the economy so federal reserve cut the interest rate to stimulate the demand in economy and adopting quantitative easing monetary policy and rest of the central bank all across the globe followed the suit.

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