Monetary policy and financial stability: what role for the interest rate?
Cristina Badarau and
Alexandra Popescu (alexandra.popescu@univ-orleans.fr)
International Economics and Economic Policy, 2015, vol. 12, issue 3, 359-374
Abstract:
We propose an ex-post analysis of the behavior of a central bank confronted with financial turmoil. For this purpose, we rely on a DSGE model that combines credit market frictions with a boom and bust scenario on the price of capital. Within this framework, we seek to understand the extent to which central banks could have intervened to limit the effects of the financial bubble and its bursting. We compare the results obtained in terms of economic stabilization under a simple Taylor rule with those of an augmented rule that takes into account a financial indicator. We show that a central bank using as sole instrument the interest rate cannot simultaneously improve inflation and credit cycles. Copyright Springer-Verlag Berlin Heidelberg 2015
Date: 2015
References: Add references at CitEc
Citations: View citations in EconPapers (3)
Downloads: (external link)
http://hdl.handle.net/10.1007/s10368-014-0307-6 (text/html)
Access to full text is restricted to subscribers.
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:kap:iecepo:v:12:y:2015:i:3:p:359-374
Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/10368/PS2
DOI: 10.1007/s10368-014-0307-6
Access Statistics for this article
International Economics and Economic Policy is currently edited by Paul J.J. Welfens, Holger C. Wolf, Christian Pierdzioch and Christian Richter
More articles in International Economics and Economic Policy from Springer
Bibliographic data for series maintained by Sonal Shukla (sonal.shukla@springer.com) and Springer Nature Abstracting and Indexing (indexing@springernature.com).