About the project
In the aftermath of the outbreak of the Global Financial Crisis in 2007 and again today in response to the covid-19 pandemic, we see that central banks have gained an expanding role in economic crisis management.
In particular there has been an unprecedented increase in central bank purchases of financial assets in the market in an attempt to stretch out a giant public safety net across the financial system. Such purchases of financial assets can have distributional consequences, meaning that the central bank is expanding into what has traditionally been the domain of the parliaments, namely fiscal policy.
This development comes with a paradox. On the one hand, it prompts the question of whether central banks have abrogated to themselves powers which are not in the mandate provided by parliaments. On the other hand, in particular the increase in central bank purchases of financial assets may have created new restrictions for the central banks. Being actors on financial markets, central banks are increasingly bound by private law, such as contract and financial market law, in a way that may inhibit the institutions’ ability to fulfil their mandate of ensuring monetary stability.
This research project will examine this paradox by analysing how domestic and international law, public and private, both facilitate and limit central banks’ expanding role.
The research project has three pillars: The first one will explore the limits within which the central bank must design its operations as drawn up in domestic administrative and constitutional law as well as in public international law. The second pillar is related to central bank’s steep increase in open market operations in financial markets, and will examine how private law, in particular contract law and financial market regulations, influence the central bank’s ability to fulfil its objective. The third pillar will examine international law drivers behind central banks’ expansive role in economic crisis management.
The project draws on the expertise of the participants in the former research project “International Financial Market Regulation, Institutions and Efficiency”.
The project started in June 2021 and will last until June 2026.
Financing
The project is funded by the Finance Market Fund (managed by the Norwegian Research Council). The Fund is intended to contribute to increasing public understanding concerning financial markets, with particular emphasis on the functioning of financial markets, and also ethical issues.