Goodhart, Charles, Sunirand, Pojanart and Tsomocos, Dimitrios (2011) The Optimal Monetary Instrument for Prudential Purposes. Journal of Financial Stability, 7 (2). pp. 70-77.
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 Interest rates; Monetary base; Bank capital; Financial stability; Monetary policy|
|Centre:||Faculty of Finance|
|Date Deposited:||25 Jan 2012 19:06|
|Last Modified:||23 Oct 2015 14:06|
Actions (login required)