6 - Global Aspects of Central Bank Policies

Abstract

The chapter on “Global Aspects of Central Bank Policies”, the final part of this book, relates our findings to various aspects of global central banking: First, based on our theoretical and empirical results, we provide suggestions for a reform of the international monetary system in order to reduce instabilities linked to central banks' reserve policies. Second, we show how financial integration and global liquidity spillovers have increased the importance of central bank cooperation. This section provides some examples of how central banks have coordinated their actions in the past. Finally, by illustrating the interbank payment system of the European Union (Target) we show that Target balances arise from net cross-border capital flows. These balances are a form of official financing and may be considered as a substitute for reserves. They have contributed to balance-of-payments imbalances.