Integrating Financial Stability into Monetary Policy

The global financial crisis has highlighted the importance of integrating financial stability concerns into monetary policy. In the Bank of Canada's view, monetary policy should be the last line of defence against threats to financial stability, behind the joint responsibility of borrowers and...

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Bibliographic Details
Published in:Business economics (Cleveland, Ohio) Ohio), 2015-10, Vol.50 (4), p.200-205
Main Author: POLOZ, STEPHEN S.
Format: Article
Language:English
Subjects:
Business and Management
Central banks
Debt service
Defense
Economic crisis
Economics
Economics and Finance
Financial services
Housing prices
Inflation
Interest rates
International finance
Macroeconomics
Monetary policy
Original Article
Political Economy/Economic Systems
Risk management
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Summary:The global financial crisis has highlighted the importance of integrating financial stability concerns into monetary policy. In the Bank of Canada's view, monetary policy should be the last line of defence against threats to financial stability, behind the joint responsibility of borrowers and lenders, appropriate regulatory oversight, and sound macroprudential policies. Still, it is critical to understand the interlinkages between monetary policy and financial stability, given that the objectives are not always consistent. This implies the necessity of trade-offs. At the Bank of Canada, this is regarded as a problem of risk management rather than policy optimization. That is why the Bank operates a risk-management approach to monetary policy—keeping inflation control as its primary mission.
ISSN:0007-666X
1554-432X
DOI:10.1057/be.2015.35