 Monetary policy and illiquidityJan Toporowski Chapter 9 in Central Banking, Monetary Policy and Financial In/Stability, 2025, pp 165-178 from Edward Elgar Publishing Abstract: The discussion of financial stability, and the role of monetary policy, is incoherent because there is very little agreement on what constitutes financial stability (and, by implication, instability) – exchange rate stability, asset price stability, absence of debt default. By implication, there is a gap between the claims of various authors to the general applicability of their respective analyses and the actual applicability of their conclusions, let alone the usefulness of some of their policy recommendations. The chapter argues that the key issue is the regulation of the liquidity of all financial markets, and not just that of the banking system, through the markets for government securities. The chapter examines the sources of this liquidity in the financial portfolios of the private sector, and how that liquidity may be managed through the open market operations of central banks and the debt management operations of governments. An implication of this approach is that yield curve control and the use of (government) debt management may control the liquidity of the markets. These elements of monetary policy have been neglected in theory and policy since the 1950s. Keywords: Fragility; Monetary policy (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:elg:eechap:21992_10 Ordering information: This item can be ordered from Access Statistics for this chapter More chapters in Chapters from Edward Elgar Publishing |
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