Financial Stability and Interest‐Rate Policy: A Quantitative Assessment of Costs and Benefit

28 Pages Posted: 6 Oct 2020 Last revised: 21 Nov 2020

See all articles by Stefan Laseen

Stefan Laseen

Sveriges Riksbank - Monetary Policy Department

Andreas Pescatori

International Monetary Fund (IMF)

Date Written: August / Août 2020

Abstract

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. Résumé. Stabilité financière et politique de taux d’intérêt: évaluation quantitative des coûts et des avantages. Afin de favoriser la stabilité financière, la politique monétaire devrait‐elle utiliser son taux directeur à court terme pour équilibrer la croissance de l’endettement des ménages et du prix des logements ? Nous posons cette question pour le Canada. Dans une première approximation, notre réponse est négative.

Suggested Citation

Laseen, Stefan and Pescatori, Andreas, Financial Stability and Interest‐Rate Policy: A Quantitative Assessment of Costs and Benefit (August / Août 2020). Canadian Journal of Economics/Revue canadienne d'économique, Vol. 53, Issue 3, pp. 1246-1273, 2020, Available at SSRN: https://ssrn.com/abstract=3703810 or http://dx.doi.org/10.1111/caje.12458

Stefan Laseen (Contact Author)

Sveriges Riksbank - Monetary Policy Department ( email )

S-103 37 Stockholm
Sweden

Andreas Pescatori

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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