Arbeitspapier

Monetary policy and endogenous financial crises

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 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 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.

ISBN
978-3-95729-889-8
Sprache
Englisch

Erschienen in
Series: Deutsche Bundesbank Discussion Paper ; No. 21/2022

Klassifikation
Wirtschaft
Financial Crises
Thema
financial crisis
monetary policy

Ereignis
Geistige Schöpfung
(wer)
Boissay, Frédéric
Collard, Fabrice
Galí, Jordi
Manea, Cristina
Ereignis
Veröffentlichung
(wer)
Deutsche Bundesbank
(wo)
Frankfurt a. M.
(wann)
2022

Handle
Letzte Aktualisierung
10.03.2025, 11:42 MEZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Boissay, Frédéric
  • Collard, Fabrice
  • Galí, Jordi
  • Manea, Cristina
  • Deutsche Bundesbank

Entstanden

  • 2022

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