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How has the Crisis Affected the ‘Clean' Versus ‘Lean' Debate amongst Central Bankers?

Emmanuel Carré Maître de conférences, Centre d’économie de Paris Nord, UMR 7234, université Paris XIII. Contact :

Has the financial crisis led to a paradigm shift in monetary policy? In particular, has central banks' strategy to deal with financial stability changed? Does the central bankers' pre-crisis consensus on dealing ex post with the financial instability during the bust of the bubble (cleaning up the bust afterwards) still prevail? Or on the contrary do central bankers now prefer acting ex ante against the growth of the financial bubble (leaning against the wind)?

We examine whether the financial crisis has impacted this debate clean versus lean. We use the methods of the central bank communication literature. Ninety-four speeches on this debate, from members of the European Central Bank (ECB), the Federal Reserve (Fed) and the Bank of England, are studied over the period 2002-2012.

Two main results emerge from the analysis and coding of these speeches. First, following the crisis the consensus on the ‘clean' strategy is relaxed in the three central banks inspected. The ECB particularly becomes clearly favorable to the opposite strategy of ‘lean'. Secondly, yet, there is no signal of a new central banking paradigm on financial stability as the Bank of England and the Fed remain favorable to the ‘clean' strategy.

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