MONETARY STABILITY VERSUS FINANCIAL STABILITY IN ADJUSTING THE REAL ECONOMY

Bogdan Boldea (), Gheorghe Roxana-Maria (), Ivanovici Daniela-Cecilia () and Strezariu Iulia Ana-Maria ()
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Gheorghe Roxana-Maria: Faculty of Economics and Business Administration
Ivanovici Daniela-Cecilia: Faculty of Economics and Business Administration

Annals of Faculty of Economics, 2010, vol. 1, issue 2, 678-684

Abstract: Nowadays, in the economic theory and practice, there's commonly held idea that the primary objective of monetary policy should be price stability. However, the possibility of achieving this goal depends on the development and stability of the financial system. Even though financial stability represents a prerequisite for reaching the objective of price stability, the relationship manifests itself in reverse also. In the long term, the two objectives support and reinforce each other, but in the short term, there may occur certain incompatibilities, thus resulting in the central bank's dilemma of abandoning one in favor of the other. This paper aims to investigate precisely the circumstances in which the policies pursued to ensure price stability can cause or worsen financial stability.

Keywords: price stability; financial stability; central bank; monetary policy; National Bank of Romania (search for similar items in EconPapers)
JEL-codes: E31 E52 E58 G01 (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:ora:journl:v:1:y:2010:i:2:p:678-684

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