Assessing the link between price and financial stability
AbstractThis paper aims at investigating first the (possibly time-varying) empirical relationship between the level and conditional variances of price and financial stability, and second, the effects of macro and policy variables on this relationship in the United States and the Eurozone. Three empirical methods are used to examine the relevance of A.J Schwartz’s conventional wisdom that price stability would yield financial stability. Using simple correlations, VAR and Dynamic Conditional Correlations, we reject the hypothesis that price stability is positively correlated to financial stability. We then discuss the empirical appropriateness of the leaning against the wind monetary policy approach.
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Bibliographic InfoPaper provided by Observatoire Francais des Conjonctures Economiques (OFCE) in its series Documents de Travail de l'OFCE with number 2014-02.
Date of creation: Feb 2014
Date of revision:
Price stability; Financial stability; DCC-GARCH; VAR;
Other versions of this item:
- Christophe Blot & Jerome Creel & Paul Hubert & Fabien Labondance & Francesco Saraceno, 2013. "Assessing the Link between Price and Financial Stability," Working papers wpaper33, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
- Christophe Blot & Jérôme Creel & Fabien Labondance & Francesco Saraceno & Paul Hubert, 2014. "Assessing the link between Price and Financial Stability," Sciences Po publications 2014-02, Sciences Po.
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- 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
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-02-15 (All new papers)
- NEP-EEC-2014-02-15 (European Economics)
- NEP-MAC-2014-02-15 (Macroeconomics)
- NEP-MON-2014-02-15 (Monetary Economics)
- NEP-SOG-2014-02-15 (Sociology of Economics)
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Les enjeux du triple mandat de la BCE
by Laurence Duboys Fresney in OFCE le blog on 2014-07-16 14:22:27
- Dealing with the ECBâs triple mandate
by Laurence Duboys Fresney in OFCE le blog on 2014-07-18 10:34:37
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