Inflation Targeting and Financial Stability
AbstractA number of commentators have argued that the desirability of inflation targeting as a framework for monetary policy analysis should be reconsidered in light of the global financial crisis, on the ground that it requires neglect of the implications of monetary policy for financial stability. This paper argues that monetary policy may indeed affect the severity of risks to financial stability, but that it is possible to generalize an inflation targeting framework to take account of financial stability concerns alongside traditional stabilization objectives. The resulting framework can still be viewed as a form of flexible inflation targeting; in particular, the paper proposes a target criterion that would still imply an invariant long-run price level, despite fluctuations over time in risks to financial stability or even the occurrence of occasional financial crises.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17967.
Date of creation: Apr 2012
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- 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-2012-04-17 (All new papers)
- NEP-CBA-2012-04-17 (Central Banking)
- NEP-MAC-2012-04-17 (Macroeconomics)
- NEP-MON-2012-04-17 (Monetary Economics)
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- PIROVANO, Mara, 2013.
"Household and firm leverage, capital flows and monetary policy in a small open economy,"
2013014, University of Antwerp, Faculty of Applied Economics.
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