The adjustment of a central bank to sudden and/or unforeseen challenges. – For example, in 1999, the ECB had introduced a – new currency, namely the EUR, as – a newly established central bank, when – the price of oil, which is so important for price developments, rose sharply, – stock markets crashed worldwide in 2000, – two wars – Afghanistan, Iraq – broke out, – an attack in downtown New York shook the financial world: and all these shock events were well managed by monetary policy. – The breadth and depth of the global financial crisis that followed the subprime crisis, however, was such that monetary policy was overwhelmed on its own, and governments around the world had to use the means at their disposal – including, above all, the enactment of new legal regulations – to support central banks’ efforts to regain financial stability. – See crash, oil price, financial market stabilization agency, hurricane shocks, liquidity crisis plan, models, monetary, model uncertainty, moral suasion, oil bulletin, panic selling, petrodollar, Prague announcement, risk bearing capacity, commodity prices, shock, external, soul massage, stress test. – Cf.
ECB Monthly Bulletin, November 2006, pp. 83 ff. (shock management in the euro area), Deutsche Bundesbank Monthly Bulletin, June 2007, pp. 40 f. (asymmetric shocks in the euro area justified).
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