The Great Financial Crisis has spotlighted the role of central banks in the political maintenance of global economy. In the western world the Federal Reserve, European Central Bank and Bank of England have started stimulating economic growth by large scale asset purchases worth of hundreds of billions of dollars, euros and sterlings. Theoretically the FED, the ECB and the BOE have justified these QE purchases by so called portfolio balance channel. The idea is that large scale QE purchases lowers the longer-term interest rates and increases equity prices which is supposed to stimulate spending, investments and economic growth. In addition regulatory reforms via Dodd-Frank Act, Banking union & Basel III have strengthened central bank’s supervision over the banking sector.
Because the economic environment, growth model and mandate differs between the FED, the ECB and the BoE my paper examines how these central banks have reinterpreted transmission mechanism of QE, financial stability and their own institutional monetary objectives. This allows to discover convergence and divergence of justification processes of unconventional measures after the financial crisis. Combining this with central bank’s macroprudential analysis of financial stability makes possible to analyse more broadly financial regulation after the Great Financial Crisis. Although central banks’ justification processes differs technically, QE seems to increase central bank’s role for maintaining financial stability by higher indebtedness and asset prices. This implies that central bank’s unconventional monetary policies have strengthened finance led growth model and financialization.
