This is a searchable catalogue of the College's most recent books, book chapters, journal articles and working papers. The ANU College of Law also publishes a Research Paper Series on SSRN.

Review of International Political Economy

The dysfunctional taboo: monetary financing at the Bank of England, the Federal Reserve, and the European Central Bank

Author(s): Will Bateman, Jens van ‘t Klooster

Monetary financing – the issuance of public money to support public expenditure – remains a widespread policy taboo. In this article, we analyze the operational practices of the Bank of England, the Federal Reserve and the European Central Bank (ECB) from the 20th onwards to argue that monetary finance should be understood as a conventional and legitimate part of central banks’ core functions. We argue that monetary financing serves a crucial macro-financial role in the face of large fluctuations in the demand for and supply of government debt, where the central bank acts to stabilize sovereign debt markets. We show that monetary financing has been a stable and pervasive feature of the Bank of England’s and the Federal Reserve’s operations. Turning to the ECB, we show that by the mid-2000s the view came to dominate the institution that the central bank should allow markets to punish governments for excessive deficits. This view informed the ECB’s catastrophic reluctance to act on the 2008 and 2009 Financial Crisis deficits. By 2020 that attitude had once again largely been abandoned.

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Centre: CIPL

Research theme: Administrative Law, Law, Governance and Development, Regulatory Law and Policy

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