The optimal monetary instrument for prudential purposes
Goodhart, C., Sunirand, P. & Tsomocos, D. P.
(2009).
The optimal monetary instrument for prudential purposes.
Journal of Financial Stability,
7(2), 70-77.
https://doi.org/10.1016/j.jfs.2009.06.002
The purpose of this paper is to assess the choice between adopting a monetary base or an interest rate setting instrument to maintain financial stability. Our results suggest that the interest rate instrument is preferable, since during times of a panic or financial crisis the Central Bank automatically satisfies the increased demand for money. Thus, it prevents sharp losses in asset values and enhanced asset volatility.
| Item Type | Article |
|---|---|
| Departments | LSE > Research Centres > Financial Markets Group |
| DOI | 10.1016/j.jfs.2009.06.002 |
| Date Deposited | 06 Apr 2011 |
| URI | https://researchonline.lse.ac.uk/id/eprint/30264 |
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