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
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.
|Library of Congress subject classification:||H Social Sciences > HG Finance|
|Sets:||Research centres and groups > Financial Markets Group (FMG)|
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