La politique monétaire doit-elle être utilisée à des fins de stabilité financière ?

Grégory Levieuge

Revue française d'économie, 2018, vol. XXXIII, issue 3, 63-104

Abstract: The aim of this article is to provide a critical review of the theoretical and empirical literature on the link between monetary policy and financial (in)stability. First, we examine why the goal of price stability may have been contradictory with financial stability before the financial crisis of 2008. Then, we question the optimality of the leaning against the wind strategy (LAW), which suggests monetary policy to respond to the financial cycle in a systematic way. On the one hand, we review the main results related to Taylor rules augmented by financial targets and optimized in DSGE models with financial frictions. On the other hand, we consider the results of the costs/benefits analyses of LAW. Globally, our investigation leads to scepticism concerning the effectiveness and optimality of the LAW. Last, we highlight the shortcomings of this literature, and in particular the need for duly considering the effects of macro-prudential policy.

Date: 2018
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