This series of posts describes a study abroad course in which students visited several central banks and talked with central bankers about how they responded to—and sometimes failed to respond to—the global financial crisis, and how they are adjusting to their new roles.
by Charles Kahn, Bailey Memorial Chair Professor, Department of Finance, University of Illinois
The financial crisis changed everything. Before the dramatic events of 2007-8, most people believed that developed economies had solved the problems of guaranteeing financial and macroeconomic stability.
Nowhere was the fallout greater than in Europe. Just as the continent’s economies began to adjust to the new realities, Europe’s sovereign-debt crisis threatened the foundations of the most ambitious of all European projects: the common currency.
Central banks have the job of protecting currencies, financial systems and the macroeconomy. These jobs were regarded as routine before the financial crisis. Now many would say that they are impossible.How have these organizations adjusted to their new challenges? That’s what we are finding out for ourselves. Our group is on a trip to meet with officials at four different central banks in Europe: the European Central Bank, the Bank of England, the German Bundesbank and the Bank of Portugal. We are learning first-hand how these institutions have changed as a result of the twin crises. We are comparing the situation in Europe with that in the United States, to learn how the institutions differ, and how these differences are related to the difference in underlying economic and political conditions.
We’ll report in these entries on what we’re learning, and also on our other activities during the trip, starting in Chicago, and then going on to Frankfurt, Lisbon and London.
Posts
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