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
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Citations: View citations in EconPapers (10)

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Related works:
Working Paper: The Optimal Monetary Instrument for Prudential Purposes (2008)
Working Paper: The Optimal Monetary Instrument for Prudential Purposes (2008)
Working Paper: The Optimal Monetary Instrument for Prudential Purposes (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:7:y:2011:i:2:p:70-77

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