Price stability she brings financial stability?
Paul Krugman raises a very important question about the impact of monetary policy on financial stability. Its starting photovogue point is the well-known observation that, contrary to some predictions, an expansionary monetary policy did not create inflation during the current crisis. He continues his argument by arguing that a more restrictive monetary policy does not guarantee financial stability. If the Fed were to return to a standard Taylor rule, financial stability would not follow mechanically. As Krugman rightly points out, "This rule was designed to produce a stable inflation; it would be a miracle, a blessing of the gods, whether this rule also happened to be exactly what we need to avoid bubbles. "
Krugman, in fact, takes a stand against the common photovogue opinion (conventional wisdom), so prevalent in academic circles photovogue and in central banks, there is a link between financial stability and price stability, so that a target of more or less flexible inflation generally allows the central bank also contain photovogue financial instability.
The global financial crisis is a striking example of the error of this conventional wisdom: financial instability was indeed built in a period of price stability. A recent analysis by Christophe Blot, Jérôme Creel, Paul Hubert, Fabien the abundance and Francesco Saraceno shows that the crisis is not an exception and that in recent decades, the United States and in the euro area, the link between price stability and financial stability is not only ambiguous but also unstable over time as shown in the graph below.
We thus agree with the opinion of Krugman: inflation photovogue targeting is largely insufficient and financial stability should be achieved through a combination of macro and micro-prudential policies. In another work, Christophe Blot, Jérôme Creel, Paul Hubert and the abundance Fabien argue that the ECB should be provided with a triple mandate, financial and macroeconomic stability, in addition to price stability. In addition, they argue that the ECB should be given the instruments to effectively prosecute these three (and sometimes conflicting) goals.
Select Category Germany Unemployment bank foreign trade environment photovogue energy photovogue education employment conditions competitiveness USA Europe G20 gender inequalities tax investment industry housing OFCE - Blog monetary policy photovogue fiscal policy 2012-2017 presidential program photovogue health welfare automotive European Union Eurozone
Paul Krugman raises a very important question about the impact of monetary policy on financial stability. Its starting photovogue point is the well-known observation that, contrary to some predictions, an expansionary monetary policy did not create inflation during the current crisis. He continues his argument by arguing that a more restrictive monetary policy does not guarantee financial stability. If the Fed were to return to a standard Taylor rule, financial stability would not follow mechanically. As Krugman rightly points out, "This rule was designed to produce a stable inflation; it would be a miracle, a blessing of the gods, whether this rule also happened to be exactly what we need to avoid bubbles. "
Krugman, in fact, takes a stand against the common photovogue opinion (conventional wisdom), so prevalent in academic circles photovogue and in central banks, there is a link between financial stability and price stability, so that a target of more or less flexible inflation generally allows the central bank also contain photovogue financial instability.
The global financial crisis is a striking example of the error of this conventional wisdom: financial instability was indeed built in a period of price stability. A recent analysis by Christophe Blot, Jérôme Creel, Paul Hubert, Fabien the abundance and Francesco Saraceno shows that the crisis is not an exception and that in recent decades, the United States and in the euro area, the link between price stability and financial stability is not only ambiguous but also unstable over time as shown in the graph below.
We thus agree with the opinion of Krugman: inflation photovogue targeting is largely insufficient and financial stability should be achieved through a combination of macro and micro-prudential policies. In another work, Christophe Blot, Jérôme Creel, Paul Hubert and the abundance Fabien argue that the ECB should be provided with a triple mandate, financial and macroeconomic stability, in addition to price stability. In addition, they argue that the ECB should be given the instruments to effectively prosecute these three (and sometimes conflicting) goals.
Select Category Germany Unemployment bank foreign trade environment photovogue energy photovogue education employment conditions competitiveness USA Europe G20 gender inequalities tax investment industry housing OFCE - Blog monetary policy photovogue fiscal policy 2012-2017 presidential program photovogue health welfare automotive European Union Eurozone
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