Financial Stability and Interest-Rate Policy: A Quantitative Assessment of Costs and Benefits

March 21, 2016

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

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:
https://doi.org/10.5089/9781475522679.001
Issue:
073
Series:
Working Paper No. 2016/073
Stock No:
WPIEA2016073
ISBN:
9781475522679
ISSN:
1018-5941

IMF’s Work

RESOURCES

TOPICS

Flagship Publications

Other Publications

IMF reports and publications by country

Regional Offices

All News

See Also

For Journalists

Press Center

RESOURCES

FLAGSHIPS

KEY SERIES

IMF NOTES

Loading component...

IMF Working Papers