 Monetary and Financial Stability: So Close and Yet So Far?National Institute Economic Review, 2005, vol. 192, issue 1, 84-101 Abstract: This paper argues that changes in the financial and monetary regimes since the early 1980s may have made it more likely that financial factors in general, and the booms and busts in credit and asset prices in particular, act as drivers of economic fluctuations. As a result, the current environment may be more vulnerable to the occasional build-up of financial imbalances, ie. overextensions in (private sector) balance sheets that herald economic weakness and disinflation down the road, as they unwind, raising also the risk of financial strains and possibly even broader financial instability. Achieving simultaneously monetary and financial stability may call for some significant refinements to current policy frameworks, based on closer cooperation between prudential and monetary authorities. These refinements include a strengthening of the macroprudential orientation of regulatory and supervisory frameworks ensuring that monetary frameworks allow enough room for manoeuvre to lean pre-emptively against the build-up of the imbalances. Keywords: financial imbalances; asset prices; credit; monetary stability; financial stability (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:sae:niesru:v:192:y:2005:i:1:p:84-101 Access Statistics for this article More articles in National Institute Economic Review from National Institute of Economic and Social Research Contact information at EDIRC. |
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