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...

This paper examines what we have learned and how we should change our thinking about monetary policy strategy in the aftermath of the 2007-2009 financial crisis. It starts with a discussion of where the science of monetary policy was before the crisis and how central banks viewed monetary policy...

The financial crisis forced central banks to rediscover the importance of financial stability. The aim of the article is to identify and analyze challenges that central banks face in a post-crisis environment. The main challenges include defining financial stability and systemic risk, as well...