Financial Stability and Monetary Policy: Need for International Surveillance
In this article, we propose a new monetary framework that defines a broader set of assets, De Facto Money (DFM), as the benchmark for improving financial stability. DFM is defined as traditional monetary aggregates plus other liquid assets such as stocks and bonds. Empirical evidence for the USA, other Organisation for Economic Co-operation and Development countries, and a few emerging countries lends strong support for the connection between exceptionally fast growth of DFM and subsequent financial instability. We recommend several potential policy instruments to implement the new monetary framework. Due to cross-country spillovers from national financial crises, we suggest that international surveillance will be necessary to monitor DFM and thus the underlying conditions for financial stability in major countries. We argue that the International Monetary Fund is the ideal institution to carry out this task in terms of its reputation and expertise. Oxford University Press 2010, all rights reserved, Oxford University Press.
Volume (Year): 13 (2010)
Issue (Month): 3 (September)
|Contact details of provider:|| Postal: Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK|
Fax: 01865 267 985
Web page: http://www.jiel.oupjournals.org/
|Order Information:||Web: http://www.oup.co.uk/journals|
When requesting a correction, please mention this item's handle: RePEc:oup:jieclw:v:13:y:2010:i:3:p:939-953. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.