EconPapers    
Economics at your fingertips  
 

The Interaction Between Conventional Monetary Policy and Financial Stability: Chile, Colombia, Japan, Portugal and the UK

Zoë Venter ()
Additional contact information
Zoë Venter: Universidade de Lisboa

Comparative Economic Studies, 2020, vol. 62, issue 3, No 8, 554 pages

Abstract: Abstract The relationship between monetary policy and financial stability has gained importance in recent years as Central Bank policy rates neared the zero-lower bound. We use an SVAR model to study the impact of monetary policy shocks on three proxies for financial stability as well as a proxy for economic growth. Monetary policy is represented by policy rates for the emerging market economies and shadow rates for the advanced economies in our paper. Our main results show that monetary policy may be used to correct asset mispricing, to control fluctuations in the real business cycle and also to tame credit cycles in the majority of cases. Our results also show that for the majority of cases, in line with conventional wisdom, local currencies appreciate following a positive monetary policy shock. Monetary policy intervention may indeed be successful in contributing to or achieving financial stability. The results, however, show that monetary policy may not have the ability to maintain or re-establish financial stability in all cases. Alternative policy choices such as macroprudential policy tool frameworks which are aimed at targeting the financial system as a whole may be implemented as a means of fortifying the economy.

Keywords: Monetary policy; Financial stability; Structural vector autoregressive model (search for similar items in EconPapers)
JEL-codes: E52 F42 F34 F55 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://link.springer.com/10.1057/s41294-020-00129-w Abstract (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:pal:compes:v:62:y:2020:i:3:d:10.1057_s41294-020-00129-w

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/41294/PS2

DOI: 10.1057/s41294-020-00129-w

Access Statistics for this article

Comparative Economic Studies is currently edited by Nauro Campos

More articles in Comparative Economic Studies from Palgrave Macmillan, Association for Comparative Economic Studies Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla ().

 
Page updated 2020-09-12
Handle: RePEc:pal:compes:v:62:y:2020:i:3:d:10.1057_s41294-020-00129-w