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This paper studies the trade-offs that can arise between inflation targeting and financial stability objectives. We use a simple framework to conduct macroeconomic policy analysis under three strategies: (1) a benchmark case where monetary policy pursues traditional price stability objectives;...
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, such as capital controls and international liquidity requirements …
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This policy brief warns about the risks of discontinuing the policy responses to the COVID-19 crisis by pursuing exit strategies too early and/or too sharply. It outlines a comprehensive strategy for limiting such risks globally and offers an in-depth discussion of the European situation. Due to...
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Blanchard (2005) suggested that active interest rate policy might induce unstable dynamics in highly-indebted economies. We examine this in a dynamic general equilibrium model where Calvo-type price rigidities provide a rationale for inflation stabilization. Unstable dynamics can occur when the...
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This paper provides a framework to analyse emergency liquidity assistance of central banks on financial markets in … response to aggregate and idiosyncratic liquidity shocks. The model combines the microeconomic view of liquidity as the ability … to sell assets quickly and at low costs and the macroeconomic view of liquidity as a medium of exchange that influences …
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