Monetary policy, market concentration and financial instability

Ilhan Dögüs

Chapter 11 in Central Banking, Monetary Policy and Financial In/Stability, 2025, pp 204-222 from Edward Elgar Publishing

Abstract: The post-Keynesian literature has rightly criticised inflation targeting as ineffective in achieving price stability since inflation is not a demand issue. It is legitimate, then, to question why inflation targeting has been implemented for the last three decades. This chapter argues that the main function of inflation targeting is to contribute to financialisation and market concentration, which are the distinguishing macro issues of the last three decades. Sharp rate hikes give rise to market concentration by stimulating bankruptcies, whereas rate cuts encourage M&A and takeovers by inflating financial markets. Interest rate changes pave the way for financial profits over financial speculation.

Keywords: Monetary policy; Market concentration; Economic policy; Financial stability (search for similar items in EconPapers)
Date: 2025
ISBN: 9781035302147
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