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Tensions in the Implementation of Central Banks’ Policies in the Pursuit of Economic Development

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  • Martín Guzman

    ()
    (Brown University, UNLP)

  • Pablo Gluzmann

    ()
    (CONICET, CEDLAS-UNLP)

Abstract

This paper provides an explanation of how the implementation of particular types of monetary policy and financial regulation affects economic development through its effects on macroeconomic stability. Firstly, we focus on the problems associated to the definition of reaction functions for the execution of monetary policy. Secondly, we analyze the problems involved in the design and implementation of macro-prudential regulatory policies, emphasizing how the ability of the regulator to interpret financial risks is a determinant of financial stability. Our analysis is not restricted to the case of Argentina. Instead, its applicability extends to all those economies in which the instrument of monetary policy is the interest rate and to those that are experiencing intense transformations in the configuration of their financial system.

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File URL: http://www.bcra.gov.ar/pdfs/investigaciones/65-66_Guzman.pdf
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Bibliographic Info

Article provided by Central Bank of Argentina, Economic Research Department in its journal Ensayos Económicos.

Volume (Year): 1 (2012)
Issue (Month): 65-66 (September)
Pages: 173-205

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Handle: RePEc:bcr:ensayo:v:1:y:2012:i:65-66:p:173-205

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Related research

Keywords: development; financial regulation; financial stability; monetary policy;

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References

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  1. Orphanides, Athanasios, 2003. "Historical monetary policy analysis and the Taylor rule," Journal of Monetary Economics, Elsevier, vol. 50(5), pages 983-1022, July.
  2. Rigobon, Roberto & Sack, Brian, 2004. "The impact of monetary policy on asset prices," Journal of Monetary Economics, Elsevier, vol. 51(8), pages 1553-1575, November.
  3. Edwin M. Truman, 2003. "Inflation Targeting in the World Economy," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 346.
  4. Thomas J. Sargent & Neil Wallace, 1981. "Some unpleasant monetarist arithmetic," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall.
  5. Aghion, Philippe & Hemous, David & Kharroubi, Enisse, 2009. "Credit Constraints, Cyclical Fiscal Policy and Industry Growth," CEPR Discussion Papers 7359, C.E.P.R. Discussion Papers.
  6. Bernanke, Ben S. & Gertler, Mark & Gilchrist, Simon, 1999. "The financial accelerator in a quantitative business cycle framework," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 21, pages 1341-1393 Elsevier.
  7. Ricardo J. Caballero & Alp Simsek, 2009. "Fire Sales in a Model of Complexity," NBER Working Papers 15479, National Bureau of Economic Research, Inc.
  8. Sebastian Galiani & Daniel Heymann & Mariano Tommasi, 2002. "Missed Expectations: The Argentine Convertibility," William Davidson Institute Working Papers Series 515, William Davidson Institute at the University of Michigan.
  9. Philippe Aghion & George-Marios Angeletos & Abhijit Banerjee & Kalina Manova, 2005. "Volatility and Growth: Credit Constraints and Productivity-Enhancing Investment," NBER Working Papers 11349, National Bureau of Economic Research, Inc.
  10. Frank Smets, 1998. "Output gap uncertainty: does it matter for the Taylor rule?," BIS Working Papers 60, Bank for International Settlements.
  11. Ramey, Garey & Ramey, Valerie A, 1995. "Cross-Country Evidence on the Link between Volatility and Growth," American Economic Review, American Economic Association, vol. 85(5), pages 1138-51, December.
  12. Gilchrist, Simon & Leahy, John V., 2002. "Monetary policy and asset prices," Journal of Monetary Economics, Elsevier, vol. 49(1), pages 75-97, January.
  13. Frederic S. Mishkin, 2001. "The Transmission Mechanism and the Role of Asset Prices in Monetary Policy," NBER Working Papers 8617, National Bureau of Economic Research, Inc.
  14. Michael Bordo & Barry Eichengreen & Daniela Klingebiel & Maria Soledad Martinez-Peria, 2001. "Is the crisis problem growing more severe?," Economic Policy, CEPR & CES & MSH, vol. 16(32), pages 51-82, 04.
  15. Peersman, Gert & Smets, Frank, 1999. "The Taylor Rule: A Useful Monetary Policy Benchmark for the Euro Area?," International Finance, Wiley Blackwell, vol. 2(1), pages 85-116, April.
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