Monetary policy, financial stability and interest rate rules

Giorgio Di Giorgio and Zeno Rotondi

Journal of Risk Management in Financial Institutions, 2011, vol. 4, issue 3, 229-242

Abstract: This paper investigates the empirical properties of simple interest rate rules that embed either ‘backward’ or ‘forward’ interest rate smoothing. Such interest rate rules can be rationalised as the operative reaction functions used by central banks pursuing monetary policy and financial stability targets. This paper considers the implications of banks’ risk management practices for monetary policy and derives interest rate rules by modelling the desire of the central bank to stabilise different definitions of the ‘basis’ risk as a contribution to financial stability.

Keywords: central banking; interest rate rules; monetary policy; financial stability; asset prices; futures market; hedging; basis risk; Federal Reserve; E44; E52; E58; G12; G13 (search for similar items in EconPapers)
JEL-codes: E5 G2 (search for similar items in EconPapers)
Date: 2011
References: Add references at CitEc
Citations:

Downloads: (external link)
https://hstalks.com/article/2228/download/ (application/pdf)
https://hstalks.com/article/2228/ (text/html)
Requires a paid subscription for full access.

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:aza:rmfi00:y:2011:v:4:i:3:p:229-242

Access Statistics for this article

More articles in Journal of Risk Management in Financial Institutions from Henry Stewart Publications
Bibliographic data for series maintained by Henry Stewart Talks ().