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Monetary Policy under the Border between Price Stability and Financial Stability

Author

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  • Irina-Raluca BADEA

    (University of Craiova Faculty of Economics and Business Administration)

Abstract

The international financial crisis drew the line for the international and national authorities that conducted and implemented faulty monetary and financial policies, regardless the potential risks that might arise. It was only after the crisis burst when everyone realized the impact the systemic risk can have on the global financial system and, consequently, on every national economy. The conventional point of view is that inflation is the main source of financial instability, but recent evidence points out the fact that reaching the inflation target does not necessarily mean that the financial system is stable. What is the most important is that any source of financial instability should be diminished if not erased, hence preserving financial stability has become an important goal for the authorities, who dispute whether to include it on the objectives list of central banks or authorize another institution to achieve it. Therefore, the main goal of this paper is framing the present monetary policy framework with respect to its objectives and strategies and the necessity to reconsider it in a realistic manner in order to prevent another collapse in case of an economic downturn.

Suggested Citation

  • Irina-Raluca BADEA, 2015. "Monetary Policy under the Border between Price Stability and Financial Stability," Finante - provocarile viitorului (Finance - Challenges of the Future), University of Craiova, Faculty of Economics and Business Administration, vol. 1(17), pages 158-166, December.
  • Handle: RePEc:aio:fpvfcf:v:1:y:2015:i:17:p:158-166
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    File URL: http://feaa.ucv.ro/FPV/017-018.pdf
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    References listed on IDEAS

    as
    1. Leonardo Gambacorta, 2009. "Monetary policy and the risk-taking channel," BIS Quarterly Review, Bank for International Settlements, December.
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    7. Michael Woodford, 2012. "Inflation Targeting and Financial Stability," NBER Working Papers 17967, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    financial crisis; central banks; financial stability; price stability; inflation targeting;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G01 - Financial Economics - - General - - - Financial Crises

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