European Central Bank. Financial Crisis In The Context Of Response Measures And Evaluation Of Effects

Since Keynesian revolution, monetary policy has become one of the most important measures for macroeconomic regulation, in which expanded policy is quite a common method in the circumstance of economic recession. However, there is some argues about whether expanded monetary policy is an effective way for the recessions caused by financial crisis. After subprime crisis in 2007, almost every economy adjusted its monetary policy in order to relieve the negative impacts of this crisis.ECB, whose primary aim is stabilizing prices, has provided a pretty well environment for the development of European economics. In the past 12 years, euro zone witnessed an increased economic scale as well as an enhanced international status. As a supranational central bank, ECB is facing a more complicated circumstance than others. During this financial crisis, ECB has implemented different measures, such as funding bank system, decreasing Key interest rate, enhancing credit supports and supporting Covered bond markets, to response to different market environments.This paper focus on the evaluation of ECB's performance and effects of its policy measures in this crisis, as well as the effectiveness of monetary policy in financial crisis. After bundles of theoretical analysis and empirical tests, this paper concludes that under the background of global financial crisis, ECB's cheap and quantitative easing monetary policy is effective and has some positive influence on the stabilizing of European financial market and recovery of its real economy. Generally speaking, some measures, such as funding banking sectors, slowing down credit shrinking and stabilizing bond markets are obviously in effect.However, in the respect of coping with sovereign debt crisis, current measures can only help stable the bond interest rates of member countries, and the deeper factors, which include the imbalance of internal economy and fiscal expenses in member countries will exist in a relative long terms. Of course, there are still some problems in the process of crisis response. Firstly, ECB falls into a dilemma between stabilizing prices and enhancing economic growth. Secondly, there are some institutional defects in ECB. According to these problems, this paper also gives some advices for improvement, as well as some inspirations for China's central bank.