Monetary policy as financial-stability regulation
By: Jeremy C. Stein
Contributors: National Bureau of Economic Research
Series: NBER working paper series -- working paper 16883; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 16883.
Publisher: National Bureau of Economic Research
Published: 2011
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "This paper develops a model that speaks to the goals and methods of financial-stability policies.  There are three main points.  First, from a normative perspective, the model defines the fundamental market failure to be addressed, namely that unregulated private money creation can lead to an externality in which intermediaries issue too much short-term debt and leave the system excessively vulnerable to costly financial crises.  Second, it shows how in a simple economy where commercial banks are the only lenders, conventional monetary-policy tools such as open-market operations can be used to regulate this externality, while in more advanced economies it may be helpful to supplement monetary policy with other measures.  Third, from a positive perspective, the model provides an account of how monetary policy can influence bank lending and real activity, even in a world where prices adjust frictionlessly and there are other transactions media besides bank-created money that are outside the control of the central bank"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 6/2/2011.

Includes bibliographical references.

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Mode of access: World Wide Web.