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Simple Rules for Financial Stability

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  • John B. Taylor

    (Department of Economics, Stanford University)

Abstract

Thank you for the opportunity to speak at this conference on financial stability. I would like to use the opportunity to discuss three interrelated proposals to bolster and maintain financial stability. The first would reform the rules of bankruptcy to handle large financial institutions with a minimum of disruption. The second would put aside any plans for temporary countercyclical capital buffers and focus macro-prudential policy simply on setting permanent and appropriate capital and subordinated debt ratios. The third would start to move back to a more rules-based monetary policy. Taken together these proposals would constitute a sound overall strategy to improve financial and economic stability.

Suggested Citation

  • John B. Taylor, 2013. "Simple Rules for Financial Stability," Economics Working Papers 13106, Hoover Institution, Stanford University.
  • Handle: RePEc:hoo:wpaper:13106
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    References listed on IDEAS

    as
    1. Taylor, John B. & Wieland, Volker, 2010. "Surprising comparative properties of monetary models: Results from a new model database," Working Paper Series 1261, European Central Bank.
    2. McAdam, Peter & Straub, Roland & Coenen, Günter, 2007. "Tax reform and labour-market performance in the euro area: a simulation-based analysis using the New Area-Wide Model," Working Paper Series 747, European Central Bank.
    3. Wieland, Volker & Cwik, Tobias & Müller, Gernot J. & Schmidt, Sebastian & Wolters, Maik, 2012. "A new comparative approach to macroeconomic modeling and policy analysis," Journal of Economic Behavior & Organization, Elsevier, vol. 83(3), pages 523-541.
    4. Fabio Verona, 2011. "Lumpy investment in sticky information general equilibrium," CEF.UP Working Papers 1102, Universidade do Porto, Faculdade de Economia do Porto.
    5. Wolters Maik H. & Tillmann Peter, 2015. "The changing dynamics of US inflation persistence: a quantile regression approach," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 19(2), pages 161-182, April.
    6. Coenen, Günter & McAdam, Peter & Straub, Roland, 2008. "Tax reform and labour-market performance in the euro area: A simulation-based analysis using the New Area-Wide Model," Journal of Economic Dynamics and Control, Elsevier, vol. 32(8), pages 2543-2583, August.
    7. Carboni, Giacomo & Ellison, Martin, 2011. "Inflation and output volatility under asymmetric incomplete information," Journal of Economic Dynamics and Control, Elsevier, pages 40-51.
    8. Cogan, John F. & Cwik, Tobias & Taylor, John B. & Wieland, Volker, 2010. "New Keynesian versus old Keynesian government spending multipliers," Journal of Economic Dynamics and Control, Elsevier, pages 281-295.
    9. Wieland, Volker & Wolters, Maik, 2013. "Forecasting and Policy Making," Handbook of Economic Forecasting, Elsevier.
    10. F. Verona & M. M. F. Martins & I. Drumond, 2013. "(Un)anticipated Monetary Policy in a DSGE Model with a Shadow Banking System," International Journal of Central Banking, International Journal of Central Banking, vol. 9(3), pages 78-124, September.
    11. Cogan, John F. & Taylor, John B. & Wieland, Volker & Wolters, Maik H., 2013. "Fiscal consolidation strategy," Journal of Economic Dynamics and Control, Elsevier, vol. 37(2), pages 404-421.
    12. Sebastian Schmidt, 2013. "Optimal Monetary and Fiscal Policy with a Zero Bound on Nominal Interest Rates," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(7), pages 1335-1350, October.
    13. Taylor, John B. & Wieland, Volker, 2012. "Surprising comparative properties of monetary models: Results from a new model database," IMFS Working Paper Series 66, Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS).
    14. Tillmann, Peter & Wolters, Maik Hendrik, 2012. "The changing dynamics of US inflation persistence: A quantile regression approach," IMFS Working Paper Series 60, Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS).
    15. John B. Taylor & Volker Wieland, 2012. "Surprising Comparative Properties of Monetary Models: Results from a New Model Database," The Review of Economics and Statistics, MIT Press, pages 800-816.
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