Financial stability and monetary policy--theory and practice

Both price stability and financial stability are important for achieving macroeconomic stability. It is not clear-cut, however, what weight should be attached to financial stability and price stability considerations, respectively, when making monetary policy decisions. Nevertheless, both the commun...

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Bibliographic Details
Published in:Economic bulletin (Oslo, Norway) Norway), 2006-04, Vol.77 (1), p.24
Main Authors: Haugland, Kjersti, Vikoren, Birger
Format: Article
Language:English
Subjects:
Central banks
Decision making
Economic growth
Economic stabilization
Forecasts and trends
Inflation
Interest rates
Macroeconomics
Monetary policy
Mortgage companies
Price stabilization
Prices
Securities markets
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Summary:Both price stability and financial stability are important for achieving macroeconomic stability. It is not clear-cut, however, what weight should be attached to financial stability and price stability considerations, respectively, when making monetary policy decisions. Nevertheless, both the communication and the monetary policy decisions of central banks indicate that financial stability is in the process of acquiring a more distinct role in monetary policy. This can be ascribed to the recognition that financial stability has consequences for future developments in inflation and output. In Norway, financial stability assessments are incorporated in the monetary policy advisory process, as Norges Bank Financial Stability contributes information, forecasts and recommendations in the process leading to monetary policy decisions. [PUBLICATION ABSTRACT]
ISSN:0029-1676
1503-8831