Should the central bank prevent "excessive" asset price dynamics or should it wait until the boom spontaneously turns into a crash and intervene only afterwards? The debate over this issue goes back at least to the exchange between Bernanke-Gertler (BG) and Cecchetti but has not settled yet. In...

The paper models the links between financial fragility, asset markets and monetary policy. It is shown that central bank's concern about the cost of financial disruption generates an asymmetric response, thus contributing to the creation of an asset price bubble. In an economy with a highly...

While the ECB helped mitigate the euro crisis in the aftermath of Lehman, it has stretched its monetary mandate and moved into fiscal territory. This text describes and summarises the crucial role played by the ECB in the intervention spiral resulting from its bid to manage the crisis. It also...

We evaluate the policy of flexible inflation targeting implemented by the Norges Bank since March 2001. We discuss the reasons why the real interest rates are significantly higher in Norway than in the rest of Europe. Finally we propose some institutional changes that can improve the policy...

The paper analyses adverse investment, growth and distributional effects of ultra-loose monetary policies based on the monetary overinvestment theories of Hayek and Mises. We argue that ultra-loose monetary policies create incentives to substitute real investment by financial investment. When...

This paper retraces how financial stability considerations interacted with U.S. monetary policy before and during the Great Recession. Using text-mining techniques, we construct indicators for financial stability sentiment expressed during testimonies of four Federal Reserve Chairs at...