If monetary policy is to aim at financial stability, how would it change? To analyze this question, this paper develops a general-form, axiomatic framework. Financial stability objectives are shown to make a monetary authority more conservative and more aggressive. Conservative as it sets higher...

This paper shows that a rate hike has countervailing effects on banks' risk appetite. It reduces risk when the debt burden of the banking sector is modest. We model a regulator whose trade-off between bank risk and credit supply is derived from a welfare function. We show that the regulator...

Financial deepening and increases in the private sector's credit-to-output ratio are expected to strengthen the monetary policy transmission mechanism in Turkey. However, shifts in the structure and composition of financial intermediation are also important for the transmission mechanism. From...