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For decades, economic policymakers have worshipped at the altar of combating inflation, reducing public deficits, and discouraging risky behavior by investors. That mindset made them hesitate when the global financial crisis erupted in 2007–08. In the face of the worst economic disaster in 75 years, they often worried excessively about the risks and possible losses from their actions, rather than moving forcefully to support financial institutions, governments, and people. Ángel Ubide's provocative thesis in Paradox of Risk is that central banks' fear of inflation and risk taking has hampered their efforts to revive global prosperity. In their confusion, he argues, policymakers made the recovery weaker. He calls on world leaders to abandon old shibboleths and learn the lessons from the financial crisis and its sluggish aftermath. Ubide mobilizes a wealth of research on the experience from the last decade, urging policymakers to leave their "comfort zone," embrace risk taking, and take bolder action to brighten the world's economic prospects.

The Centre for International Governance Innovation (CIGI) provided funding for this study.

Preface

Acknowledgments

Abbreviations

1 Introduction

2 The Intellectual and Political Background to the Crisis

3 The Great Experiment in Monetary Policy: Central Bank Actions since 2007

4 Has Monetary Policy Worked? Yes, No, Maybe 

5 Have We Learned Anything? Crafting a Monetary Policy for All Seasons

6 Conclusion: The Future Is Not What It Used to Be 

Appendix A Selected Policy Announcements by Major Central Banks

Appendix B Impact of Quantitative Easing Announcements on Asset Prices

Appendix C Impact of Negative Rates on Asset Prices 

References 

Index