The Optimal Monetary Instrument for Prudential Purposes

C.A.E. Goodhard, P. Sunirand and Dimitrios Tsomocos

No 2008fe26, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: The purpose of this paper is to assess the choice between adopting a monetary base or an interest rate setting instrument to maintain financial stability. Our results suggest that the interest rate instrument is preferable, since during times of a panic or financial crisis the Central Bank automatically satisfies the increased demand for money. Thus, it prevents sharp losses in asset values and enhanced asset volatility

Keywords: Interest Rates; Monetary Base; Bank Capital; Financial Stability; Monetary Policy (search for similar items in EconPapers)
JEL-codes: D58 E44 G28 (search for similar items in EconPapers)
Date: 2008-06-01
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: The optimal monetary instrument for prudential purposes (2011)
Working Paper: The Optimal Monetary Instrument for Prudential Purposes (2008)
Working Paper: The Optimal Monetary Instrument for Prudential Purposes (2008)
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