Conclusion and Further thinking

           Conclusion:

         No matter the Great Depreciation in the 85 years ago or the global financial crisis recently happened. Central bank take an important role during it. With the development of the financial innovations and the derivatives productions. The supervision ability of central bank should be improve. Also, the cooperation is especially important. In the Great Depreciation, there is no cooperating between countries but we can see from this global financial crisis. Cooperation can help other countries pass the crisis e.g. Iceland financial crisis. Because of Economic Integration need the countries all over the world to cooperation.

          Further thinking:

        Despite the world economic situation now get better, but what should central bank do to avoid financial crisis in the future is a question we should consider. In my opinion, the attitude is an important factor. It conclude the attitude central bank towards entire economy and the consumer towards consumption. I will think about it in the future. 

Developing countries's Central Bank Responses in the Global Financial Crisis

        Last blog I talked about the central bank response to the global financial crisis from developed countries. In fact, not only in the developed countries, developing countries also suffer from the global financial crisis and take measures after global financial crisis like China.

         Although in recent years Chinese economy had a booming increased and became the become the world's second largest economy behind U.S. But we can easily see from the graph of Chinese GDP growth change percent. It has a sharply jump from the financial crisis happened. 

                                                                Graph 1: China GDP growth (annual %)

           Chinese central bank hold few subprime bonds and  foreign exchange reserves held in the form of U.S. Treasury bonds, so the financial effect to China is not strong like other countries. But exports are the one of most important part to Chinese economy, when the global financial crisis happened, the exports of China suffer serious damage. 

                                                                     Graph 2: China Exports

                   

             For Chinese central bank, there are not so many financial derivatives production to supervise, and the People's bank of China has strong power to control the commercial banks and economy. In one hand, Chinese central bank raised the reserve ratio 15 consecutive times from 9% to 17.5% between 5.1.2007 to 7.6.2008. It is for increasing balance sheet of reserves of banks and decreasing the inflation. After that, central bank decrease the reserve ratio through political regulation to increase the money supply. On the other hand, government through central bank issues the four trillion yuan investment project. The methods combine open market operation and political regulation I think it is good for economy. For the developing countries which market level not high as developed countries is a good choice to meet the financial crisis.

                Next blog I will give the conclusion and some further thinking about central bank.

                Data:

                The graph collected from http://www.quandl.com

                 

                Conference:

          People's Daily Online. (8.10.2008) China's central bank cuts reserve requirement ratio, interest rate to stimulate economy. 

Developed countries's Central Bank Responses in the Global Financial Crisis

          In last blog, I mentioned in Larry Elliott's article, the global financial crisis been divided into five key stages. Different from the others financial crisis in the past. The government and central bank all over the world react quickly. 

        In the U.S., the Emergency Economic Stabilization Act of 2008 published in the 3.10.2008 after Lehman Brothers filed for bankrupt.Including the Government has allocated seven hundred billion U.S. dollars to buy illiquid securities secured by real estate, the purpose is to increase the liquidity of the secondary mortgage market and reduce losses of financial institutions have these securities may be facing. After that Federal reserve through Quantitative easing policy to increase amount of money supply. In Obama government, they made a number of new solutions and continued the QE policy. In 31.12.2012, Federal reserve system released the QE4 said that Monthly purchasing $ 45 billion debt to replace operation twist, QE3 per month plus $ 40 billion of the amount of easing, the Federal asset purchases to reach $ 85 billion per month. In addition to quantitative easing drastic than the Federal to maintain a zero interest rate policy to keep interest rates at 0 to 0.25 percent of the very low levels.

                                                      Graph 1: Money supply of Unite State from 1998 to 2012

            Similar to the policy of U.S central bank, the central bank in most developed countries also choose to inject money supply. In Europe, the European Central bank also issue a series methods to meet the financial crisis. The key point is also to print money into the market. France, Belgium and Luxembourg, the three governments to provide 9 billion euros in Dexia Group. After the Irish banks are affected, the Irish government announced six Irish banks including Allied Irish Bank, Bank of Ireland, British Irish Bank, Irish Life Permanent, Irish Nationwide and EBS Building Society to guarantee all deposits, including bonds, senior debt and dated subordinated debt, involving a debt of about 400 billion U.S. dollars.

              This blog I talk about the methods central bank take to meet the global financial crisis in developed countries. Next blog I will focus on the developing countries behavior.
                 Data:
                 The graph collected from http://www.quandl.com/

                 The video collected from http://www.youtube.com
               
                 Conference:
                 Quantitative easing, Bank of England.