Central Banks and Financial Crisis - A First Assessment of the Tools Used for Interventions

The paper tries to give a first assessment of the tools used by central banks for interventions from the starting of the financial crisis to end-March 2009 using the results of a research conducted through the analysis of the evolution of central banks' balance sheets. The first part of the paper is devoted to the analysis of the operations carried out through the granting of last resort loans (LOLR) to specific financial institutions. In the subsequent part the attention shifts to the operations carried out by central banks to ensure liquidity to the market. These operations have been much more important than those addressed to specific institutions and have taken place for amounts which are indeed extraordinary and with a variety of new tools of interventions. The analysis is based on a comparison between the action undertaken, respectively, by the Federal Reserve System and by the Eurosystem. The paper concludes with some remarks on the exit strategies which will crucially depend on the policy action regulatory authorities will take in the immediately next future in a framework which requires a strong coordination between central banks and fiscal authorities, both at national and at international levels.