Assessing the link between Price and Financial Stability

Christophe Blot (), Jerome Creel, Paul Hubert, Fabien Labondance and Francesco Saraceno ()
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Christophe Blot: OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po
Francesco Saraceno: OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po

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Abstract: This paper aims at investigating first the (possibly time-varying) empirical relationship between the level and conditional variances of price and financial stability, and second, the effects of macro and policy variables on this relationship in the United States and the Eurozone. Three empirical methods are used to examine the relevance of A.J. Schwartz's "conventional wisdom" that price stability would yield financial stability. Using simple correlations, VAR and Dynamic Conditional Correlations, we reject the hypothesis that price stability is positively correlated to financial stability. We then discuss the empirical appropriateness of the "leaning against the wind" monetary policy approach.

Keywords: Price stability; Financial stability; DCC-GARCH; VAR (search for similar items in EconPapers)
Date: 2014-02
Note: View the original document on HAL open archive server: https://hal-sciencespo.archives-ouvertes.fr/hal-01070529
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Related works:
Journal Article: Assessing the link between price and financial stability (2015)
Working Paper: Assessing the link between price and financial stability (2015)
Working Paper: Assessing the link between price and financial stability (2015)
Working Paper: Assessing the link between price and financial stability (2014)
Working Paper: Assessing the link between Price and Financial Stability (2014)
Working Paper: Assessing the Link between Price and Financial Stability (2013)
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