Putting Money Back Into Monetary Policy: A Monetary Anchor For Price And Financial Stability

The recent financial crisis did not begin in Canada, and the author's monetary policy regime has coped with it well. But it has reminded them that stable inflation does not guarantee financial stability, and made it imperative that the 2011 monetary policy agreement between the Bank of Canada and the minister of finance should be explicit about the Bank's responsibilities in this area. This paper argues that the pursuit of price stability contributes significantly to financial stability, and that these effects stem from the role of money and credit growth in the mechanisms that transmit monetary policy's effects to inflation and to asset markets.

Provided by: C.D. Howe Institute Topic: CXO Date Added: Oct 2010 Format: PDF

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