Inflation and Financial Stability Trade‐off: Role of Monetary Policy Credibility and Fiscal Cyclicality
Akhmad Syakir Kurnia,
Johan Beni Maharda and
Economic Papers, 2021, vol. 40, issue 1, 31-53
This paper examines the role of monetary credibility and fiscal cyclicality in generating the trade‐off between inflation rates and financial stability. We systematically develop simple theoretical models to shape the rationalisation framework, which demonstrates the role of fiscal cyclicality behaviour in arousing a trade‐off for the monetary policy to target low inflation rates and a stable financial system at the same time. By utilising the generalised method of moment (GMM), we find that a credible monetary policy generates a trade‐off between inflation and financial stability as long as the fiscal policy is procyclical.
References: Add references at CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bla:econpa:v:40:y:2021:i:1:p:31-53
Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0812-0439
Access Statistics for this article
Economic Papers is currently edited by Professor Guay Lim
More articles in Economic Papers from The Economic Society of Australia Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().