Conceptualizing financialization of monetary policy

Marcos Centurion-Vicencio and Mateo Villalba

Chapter 15 in Central Banking, Monetary Policy and Financial In/Stability, 2025, pp 287-310 from Edward Elgar Publishing

Abstract: This chapter critiques traditional monetary policy theory, highlighting its limitations and implications for central banking and financial stability. It challenges the assumption of central bank impartiality and examines how financial interest groups influence monetary decisions, potentially compromising monetary choices. By introducing the concept of “financialization of monetary policy,” the chapter explores how these groups may “capture” central banks, leading to financial instability. A case study of Ecuador's transition from the Sucre to dollarization illustrates these dynamics. This analysis contributes to the ongoing debate on monetary policy by emphasizing the need to account for the role of financial interests in central bank actions. Keywords: Financialization, Dollarization, Latin America, Monetary Policy, Financial Instability.

Date: 2025
ISBN: 9781035302147
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