Financial Stability and Interest-Rate Policy: A Quantitative Assessment of Costs and Benefits
March 21, 2016
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Summary
Should monetary policy use its short-term policy rate to stabilize the growth in household credit and housing prices with the aim of promoting financial stability? We ask this question for the case of Canada. We find that to a first approximation, the answer is no— especially when the economy is slowing down.
Subject: Central bank policy rate, Credit, Financial crises, Financial sector policy and analysis, Financial sector stability, Financial services, Inflation, Money, Prices
Keywords: Bayesian VAR, Central bank policy rate, Credit, credit growth, credit variable, crisis inflation, crisis probability, Endogenous Financial Risk, financial crisis, Financial sector stability, Global, Inflation, interest rate, Monetary Policy, monetary policy shock, Non-Linear Dynamics, Policy Evaluation, WP
Pages:
29
Volume:
2016
DOI:
Issue:
073
Series:
Working Paper No. 2016/073
Stock No:
WPIEA2016073
ISBN:
9781475522679
ISSN:
1018-5941
