EconPapers    
Economics at your fingertips  
 

The optimal monetary instrument for prudential purposes

C.A.E. Goodhart, P. Sunirand and Dimitrios Tsomocos

Journal of Financial Stability, 2011, vol. 7, issue 2, 70-77

Abstract: The purpose of this paper is to assess the choice between adopting a monetary base or an interest rate setting instrument to maintain financial stability. Our results suggest that the interest rate instrument is preferable, since during times of a panic or financial crisis the Central Bank automatically satisfies the increased demand for money. Thus, it prevents sharp losses in asset values and enhanced asset volatility.

Keywords: Interest; rates; Monetary; base; Bank; capital; Financial; stability; Monetary; policy (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1572-3089(09)00037-0
Full text for ScienceDirect subscribers only

Related works:
Working Paper: The Optimal Monetary Instrument for Prudential Purposes (2008) Downloads
Working Paper: The Optimal Monetary Instrument for Prudential Purposes (2008) Downloads
Working Paper: The Optimal Monetary Instrument for Prudential Purposes (2008) Downloads
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:eee:finsta:v:7:y:2011:i:2:p:70-77

Access Statistics for this article

Journal of Financial Stability is currently edited by I. Hasan, W. C. Hunter and G. G. Kaufman

More articles in Journal of Financial Stability from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

 
Page updated 2024-03-31
Handle: RePEc:eee:finsta:v:7:y:2011:i:2:p:70-77