Pursuing financial stability under an inflation-targeting regime

Qaisar Akram, Gunnar Bårdsen and Kjersti-Gro Lindquist
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Kjersti-Gro Lindquist: Norges Bank (Central Bank of Norway)

No 2006/08, Working Paper from Norges Bank

Abstract: We evaluate two main views on pursuing financial stability within a flexible inflation targeting regime. It appears that potential gains from an activist or precautionary approach to promoting financial stability are highly shock dependent. We find support for the conventional view that concern for financial stability generally warrants a longer target horizon for inflation. The preferred target horizon depends on the financial stability indicator and the shock. An extension of the target horizon favoring financial stability may contribute to relatively higher variation in inflation and output.

Keywords: Monetary policy; financial stability (search for similar items in EconPapers)
JEL-codes: C51 C52 C53 E47 E52 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2006-09-26
New Economics Papers: this item is included in nep-cba, nep-fmk, nep-mac and nep-mon
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Citations: View citations in EconPapers (1)

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Journal Article: Pursuing financial stability under an inflation-targeting regime (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:bno:worpap:2006_08

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