- "The persistent problems of the US economy have led Ben Bernanke to talk about implementing a fresh monetary stimulus in the United States (further purchases of assets or even loan portfolios by the Federal Reserve?). The ECB, on the other hand, seems rather inclined to normalise its monetary policy (elimination of 1-year repos, and virtual halt to the government bond purchase programme). In order to ascertain whether it is the Federal Reserve or the ECB that is going in the right direction, we have to determine whether a more expansionary monetary policy can be efficient in terms of boosting growth in the present situation."
- "That is the case if:
• households or companies have the capacity and the will to run up more debt; which seems to be the case only in a few countries (France, Italy);
• the expansionary monetary policy enables banks to lend more (in countries where credit demand is sufficient); it does not seem that the banks are rationing credit; they are above all concerned about their additional capital needs;
• or if the expansionary monetary policy drives some asset prices upwards, which will trigger a positive wealth effect."
- "This is perhaps the case with property prices in a few countries (United States, France); but is it really desirable to jump-start the economies by triggering a fresh real estate bubble?"
- "All in all, we believe a changeover to an even more expansionary monetary policy implies risks (how will the excess liquidity thus created be used?) without any guarantee of a positive effect on real activity."
- "That is the case if:
• households or companies have the capacity and the will to run up more debt; which seems to be the case only in a few countries (France, Italy);
• the expansionary monetary policy enables banks to lend more (in countries where credit demand is sufficient); it does not seem that the banks are rationing credit; they are above all concerned about their additional capital needs;
• or if the expansionary monetary policy drives some asset prices upwards, which will trigger a positive wealth effect."
- "This is perhaps the case with property prices in a few countries (United States, France); but is it really desirable to jump-start the economies by triggering a fresh real estate bubble?"
- "All in all, we believe a changeover to an even more expansionary monetary policy implies risks (how will the excess liquidity thus created be used?) without any guarantee of a positive effect on real activity."
Natixis Flash Economics 388 20100803
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