Inflation Targeting and Financial Stability
A 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.
|Date of creation:||Apr 2012|
|Date of revision:|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Michael Woodford, 2007.
"Forecast Targeting as a Monetary Policy Strategy: Policy Rules in Practice,"
NBER Working Papers
13716, National Bureau of Economic Research, Inc.
- Michael Woodford, 2012. "Forecast Targeting as a Monetary Policy Strategy - Policy Rules in Practice," Book Chapters, in: Evan F. Koenig & Robert Leeson & George A. Kahn (ed.), The Taylor Rule and the Transformation of Monetary Policy, chapter 9 Hoover Institution, Stanford University.
- Claudio Borio & Mathias Drehmann, 2009. "Assessing the risk of banking crises - revisited," BIS Quarterly Review, Bank for International Settlements, March.
- Michael Woodford, 2010. "Financial Intermediation and Macroeconomic Analysis," Journal of Economic Perspectives, American Economic Association, vol. 24(4), pages 21-44, Fall.
- Troy A. Davig & Craig S. Hakkio, 2010. "What is the effect of financial stress on economic activity," Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 35-62.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:17967. 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: ()
If references are entirely missing, you can add them using this form.