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The optimal monetary instrument for prudential purposes

Goodhart, Charles, Sunirand, P. and Tsomocos, D. P. (2009) The optimal monetary instrument for prudential purposes. Journal of Financial Stability, 7 (2). pp. 70-77. ISSN 1572-3089

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Identification Number: 10.1016/j.jfs.2009.06.002


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.

Item Type: Article
Official URL:
Divisions: Financial Markets Group
Subjects: H Social Sciences > HG Finance
Date Deposited: 06 Apr 2011 15:12
Last Modified: 20 Oct 2021 01:47

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