How monetary policy controls the crisis cycle

Frankfurt It’s a debate that comes up with every crisis: How should central banks like the Fed, the Bank of England or the European Central Bank (ECB) react to crises? Should they step in boldly by buying securities and increasing their balance sheet to support the economy and markets? Or do they only create useless bubbles that burst again?

A new study by Niall Ferguson, Martin Kornejew, Paul Schmelzing and Moritz Schularick looks back around 400 years in 17 national economies and comes to a mixed conclusion: Yes, the courageous intervention of the central banks in crises helps very significantly to stabilize the economy.