From Monetary Policy to Macroprudentials: the Aftermath of the Great Recession
Bilin Neyapti ()
No 1629, BAFFI CAREFIN Working Papers from BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy
Monetary policy is about the determination of money stock and interest rates to affect economic activity in the short-, medium- and the long-term. Besides helping to eliminate recessionary or inflationary business cycles, controlling interest rates and value of money have important impact on economic prospects by way of affecting domestic and international transaction costs. From a normative perspective, the ultimate goal of monetary policy is to increase allocative and distributional efficiency that are, in theory, consistent with the price stability focus of the modern central banking practice. Low level and variability of inflation rates is necessary for investment and sustainable growth; provided that the benefits of growth are distributed equitably, it also contributes economic development.
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