Assessing the Link between Price and Financial Stability

Christophe Blot (), Jerome Creel, Paul Hubert, Fabien Labondance and Francesco Saraceno
Additional contact information
Paul Hubert: OFCE - Sciences Po
Francesco Saraceno: OFCE - Sciences Po, and LUISS

Working papers from Financialisation, Economy, Society & Sustainable Development (FESSUD) Project

Abstract: This paper aims at investigating first the (possibly time-varying) empirical relationship between the level and conditional variances of price and financial stability, and second, the effects of macro and policy variables on this relationship in the United States and the Eurozone. Three empirical methods are used to examine the relevance of A.J Schwartz's "conventional wisdom" that price stability would yield financial stability. Using simple correlations, VAR and Dynamic Conditional Correlations, we reject the hypothesis that price stability is positively correlated to financial stability. We then discuss about the empirical appropriateness of the "leaning against the wind" monetary policy approach.

Keywords: Price Stability; Financial stability; DCC-GARCH; VAR (search for similar items in EconPapers)
JEL-codes: C32 E31 E44 E52 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2013-02-01
New Economics Papers: this item is included in nep-eec, nep-mac and nep-mon
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http://fessud.eu/wp-content/uploads/2013/04/Assess ... ing-Paper-no.-33.pdf Full text (application/pdf)

Related works:
Journal Article: Assessing the link between price and financial stability (2015)
Working Paper: Assessing the link between price and financial stability (2015)
Working Paper: Assessing the link between price and financial stability (2015)
Working Paper: Assessing the link between price and financial stability (2014)
Working Paper: Assessing the link between Price and Financial Stability (2014)
Working Paper: Assessing the link between Price and Financial Stability (2014)
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