Monetary policy and endogenous financial crises
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- dc.contributor.author Boissay, F.
- dc.contributor.author Collard, F.
- dc.contributor.author Galí, Jordi
- dc.contributor.author Manea, C.
- dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa
- dc.date.accessioned 2024-11-14T10:09:54Z
- dc.date.available 2024-11-14T10:09:54Z
- dc.date.issued 2021-12-17
- dc.date.modified 2024-11-14T10:08:21Z
- dc.description.abstract We study whether a central bank should deviate from its objective of price stability to promote financial stability. We tackle this question within a textbook New Keynesian model augmented with capital accumulation and microfounded endogenous financial crises. We compare several interest rate rules, under which the central bank responds more or less forcefully to inflation and aggregate output. Our main findings are threefold. First, monetary policy affects the probability of a crisis both in the short run (through aggregate demand) and in the medium run (through savings and capital accumulation). Second, a central bank can both reduce the probability of a crisis and increase welfare by departing from strict inflation targeting and responding systematically to fluctuations in output. Third, financial crises may occur after a long period of unexpectedly loose monetary policy as the central bank abruptly reverses course.
- dc.format.mimetype application/pdf*
- dc.identifier https://econ-papers.upf.edu/ca/paper.php?id=1810
- dc.identifier.citation
- dc.identifier.uri http://hdl.handle.net/10230/68637
- dc.language.iso eng
- dc.relation.ispartofseries Economics and Business Working Papers Series; 1810
- dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
- dc.rights.accessRights info:eu-repo/semantics/openAccess
- dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
- dc.subject.keyword financial crisis
- dc.subject.keyword monetary policy
- dc.subject.keyword Macroeconomics and International Economics
- dc.subject.keyword Adverse selectionen
- dc.title Monetary policy and endogenous financial crises
- dc.title.alternative
- dc.type info:eu-repo/semantics/workingPaper