Monetary policy and financial stability: what role in prevention and recovery?

Claudio Borio

No 440, BIS Working Papers from Bank for International Settlements

Abstract: If the criteria for an institution's success are diffusion and longevity, then central banking has been hugely successful. But if the criterion is the degree to which it has achieved its goals, then the evaluation has to be more nuanced. Historically, those goals have included a changing mix of financial and monetary stability. Attaining monetary and financial stability simultaneously has proved elusive across regimes. Edging closer towards that goal calls for incorporating systematically long-duration and disruptive financial booms and busts - financial cycles - in policy frameworks. For monetary policy, this means leaning more deliberately against booms and easing less aggressively and persistently during busts. What is ultimately at stake is the credibility of central banking - its ability to retain trust and legitimacy.

Keywords: financial cycle; balance sheet recessions; expectations gap; time inconsistency; regime shifts (search for similar items in EconPapers)
Pages: 25 pages
Date: 2014-01
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-sog
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (92)

Downloads: (external link)
http://www.bis.org/publ/work440.pdf Full PDF document (application/pdf)
http://www.bis.org/publ/work440.htm (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bis:biswps:440

Access Statistics for this paper

More papers in BIS Working Papers from Bank for International Settlements Contact information at EDIRC.
Bibliographic data for series maintained by Martin Fessler ().