EconPapers    
Economics at your fingertips  
 

Monetary Policy and Financial Stability: Cross‐Country Evidence

Christian Friedrich (), Kristina Hess and Rose Cunningham

Journal of Money, Credit and Banking, 2019, vol. 51, issue 2-3, 403-453

Abstract: We explain the heterogeneous response of central banks to financial stability risks based on a financial stability orientation (FSO) index, which reflects statutory, regulatory, and discretionary components of central banks' monetary policy frameworks. Our baseline results from a cross‐country panel of modified Taylor rules suggest that central banks with a high FSO increase their policy rates in response to elevated financial stability risks by 0.27 percentage points more than central banks with a low orientation. Back‐of‐the‐envelope calculations suggest that this policy rate differential translates into a reduced crisis probability but also into considerably lower inflation and output growth rates.

Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)
https://doi.org/10.1111/jmcb.12526

Related works:
Working Paper: Monetary Policy and Financial Stability: Cross-Country Evidence (2015) Downloads
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:wly:jmoncb:v:51:y:2019:i:2-3:p:403-453

Access Statistics for this article

Journal of Money, Credit and Banking is currently edited by Robert deYoung, Paul Evans, Pok-Sang Lam and Kenneth D. West

More articles in Journal of Money, Credit and Banking from Blackwell Publishing
Bibliographic data for series maintained by Wiley Content Delivery ().

 
Page updated 2019-10-13
Handle: RePEc:wly:jmoncb:v:51:y:2019:i:2-3:p:403-453