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Financial Stability, Monetary Policy, Banking Supervision, and Central Banking

Martin Hellwig

No 2014_09, Discussion Paper Series of the Max Planck Institute for Research on Collective Goods from Max Planck Institute for Research on Collective Goods

Abstract: The paper gives an overview over issues concerning the role of financial stability in monetary policy and the relation between banking supervision and central banking. Following a brief account of developments in the European Monetary Union since its creation, the systematic treatment contains four parts, first a systematic discussion of how a central bank’s operations differ from those of an administrative authority; second, a discussion of how the shift from convertible currencies to paper currencies has affected our understanding of monetary policy and the role of financial stability; third, a discussion of moral hazard in banking and banking supervision as a threat to monetary dominance and to the effective independence of central bank decision making in an environment in which financial stability is an essential precondition for reaching the central bank’s macroeconomic objective, e.g. price stability; finally, a discussion of the challenges for institution design and policy, with special attention to developments in the euro area.

Keywords: Banking Supervision; financial stability; monetary policy; central banking; bank resolution; independence of central banks and supervisory authorities (search for similar items in EconPapers)
JEL-codes: G18 G28 E58 E44 E42 E51 E52 G33 H63 (search for similar items in EconPapers)
Date: 2014-07
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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