Financial Stability Considerations for Monetary Policy: Empirical Evidence and Challenges

Nina Boyarchenko, Giovanni Favara and Moritz Schularick

No 2022-006, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This paper reviews literature on the empirical relationship between vulnerabilities in the financial system and the macroeconomy, and how monetary policy affects that connection. Financial vulnerabilities build up over time, with both risk appetite and risk taking rising during economic expansions. To some extent, financial crises are predictable and have severe real economic consequences when they occur. Empirically it is difficult to link monetary policy to financial vulnerabilities, in part because financial cycles have long durations, making it difficult to separate effects of changes in monetary policy from other business cycle effects.

Keywords: Monetary Policy; Financial Stability; Financial Crises; Credit; Leverage; Liquidity; Asset Prices (search for similar items in EconPapers)
JEL-codes: E44 E52 E58 G20 (search for similar items in EconPapers)
Pages: 33 p.
Date: 2022-02-15
New Economics Papers: this item is included in nep-cba, nep-fdg, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Financial Stability Considerations for Monetary Policy: Empirical Evidence and Challenges (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2022-06

DOI: 10.17016/FEDS.2022.006

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