Abstract:

From the start of the crisis in summer 2007, monetary policy has faced a number of challenges. The financial crisis has complicated the implementation of monetary policy, in particular by creating instability in the transmission mechanism. And, within a monetary union, differences between member countries have added to the uncertainty and complexity. Many central banks, including the ECB, have put into effect not only conventional measures, in particular the key interest rate at which liquidity is injected into the system, but also unconventional measures to support the functioning of financial markets. The unconventional measures, which have been maintained by the ECB and called non-standard, comprised; the provision of unlimited funding support to banks, extension of the list of eligible collateral, outright purchases of covered bonds and interventions in the euro area debt securities markets through the “Securities Markets Programme”. The goal is to remedy the malfunctioning of the money market connected to the increase in the counterparty risk premium that has led to a substantial decrease in volume and liquidity. The purpose of this paper is to mention the global financial crisis which consists of two episodes; sub-prime crisis that followed the collapse of the housing bubble in the USA and the sovereign debt crisis which still keeps the effectiveness and predominantly to discuss the role of European Central Bank in the crisis.

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