5 This includes recapitalisation measures, asset relief interventions, liquidity measures and guarantees. For  2009, the numbers as a percentage of GDP are around 12 % for Netherlands, 8 % for Germany, 5.4 % for Spain and 5 % for France. See Financial Crisis Aid amounts for a more detailed breakdown. 6 Laeven, L. and F. Valencia (2013), “Systematic banking crisis database”, IMF Economic Review, 61(2): 225–  270. 7 E.g. Diamond, D. and P. Dybvig (1983), Bank runs, deposit insurance and liquidity”, Journal of Political  Economy, 91(3): 401–419; Cooper, R. and A. John (1988), “Coordinating coordination failures in Keynesian models”, Quarterly Journal of Economics, 103(3): 441–463; Calvo, G. (1988), “Servicing the public debt: the role of expectations”, American Economic Review, 78(4):647–661. The search and matching literature also exhibits multiple equilibria, e.g. Diamond, P. (1982), “Aggregate demand management in search equilibrium”, Journal of Political Economy, 90(5): 881–894. 8 Gertler, M. and N. Kiyotaki (2015), “Banking, liquidity and bank runs in an infinite horizon economy,” American  Economic Review, 105(7): 2011–2043. 9 Eggertsson, G. and M. Woodford (2003), “The zero bound on interest rates and optimal monetary policy”,  Brookings Papers on Economic Activity, 34(1): 139–235; Woodford (2012) “Methods of Policy Accommodation at the Interest-Rate Lower Bound,” presented at the Jackson Hole symposium, August. ; Nakov, A. (2008), “Optimal and simple monetary policy rules with zero floor on the nominal interest rate”, International Journal of Central Banking, 4(2): 73–127.
As short-term interest rates approached the effective lower bound, central banks on both sides of the Atlantic undertook a number of unconventional measures aimed at influencing the whole constellation of rates that are important for the financial decisions taken by households and businesses. Forward guidance helped guide market expectations of future short-term rates. QE involved direct intervention by central banks in markets through large scale asset purchases to influence the yield curve beyond the very short term. A large body of empirical research has substantiated the success of these policies in supporting the economy and inflation, both in the euro area and in the United States.13 But central bank policy moves extended beyond just measures to counteract the impairment of the transmission mechanism caused by financial frictions. The ECB also acted in various ways to prevent self-fulfilling expectations from delivering socially undesirable outcomes by coordinating expectations onto “good” outcomes. One such policy initiative was our lender-of-last-resort intervention during the financial crisis. Revisiting the Bagehot principles set out a century and a half ago in the light of the ongoing crisis,14 the ECB lent freely to solvent financial institutions against sound collateral, penalised by a haircut. We did so in multiple ways: our liquidity operations moved to a fixed rate full allotment basis with unprecedented maturity of four years, and we widened the eligible collateral accepted in our operations.