Financial Instability and Monetary Policy: The Swedish Evidence
AbstractThis paper examines the relationship between financial instability and monetary policy within the Swedish economy. Based on a standard VAR model of monetary policy extended to include measures of financial instability and credit expansions, we examine the interaction between monetary policy and financial stability. We find that both higher interest rates, higher prices and lending expansions contribute to financial instability. As the effects from price shocks are strong and persistent compared to other shocks, our conclusion is that we cannot reject that price stability and financial stability are mutually consistent goals for monetary policy.
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Bibliographic InfoPaper provided by Sveriges Riksbank (Central Bank of Sweden) in its series Working Paper Series with number 137.
Length: 41 pages
Date of creation: 01 Jun 2002
Date of revision:
Financial instability; monetary policy; VAR model; structural shocks;
Find related papers by JEL classification:
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-06-24 (All new papers)
- NEP-FIN-2002-06-24 (Finance)
- NEP-MON-2002-06-18 (Monetary Economics)
- NEP-PKE-2002-06-24 (Post Keynesian Economics)
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