First, central banks are unique economic agents having relations with each corner of the systemic risk triangle – the banking system, financial markets and the real economy. Second, central banks are expected to confront almost every systemic crisis as entities that can readily provide liquidity. Fortunately, central banks have made progress in gaining insights through extensive research on market dynamics.
Either way, unconventional monetary policy instruments are regarded by many as a decidedly risky option. The main purpose of my presentation today is to address these misconceptions and to alleviate some of the unnecessary concerns that have arisen about the use of unconventional monetary policies.