prohibition of monetary financing to the state in the European Monetary Union), there are several issues that central banks must consider before deciding on the appropriateness for their “own” economies of providing direct financing to the real sector. I stress the term “own” because this is one of those cases in which there is no unique answer.
Whether or not a central bank engages in direct lending will very much depend on a number of considerations referring to structural features of the economy, the gravity of the crisis, the state of the financial system and a number of institutional factors, notably those governing the relationship between the central bank and the government.