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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >
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http://hdl.handle.net/10419/30544
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| Title: | | A new two-pillar strategy for the ECB  |
| Authors: | | De Grauwe, Paul Gros, Daniel |
| Issue Date: | | 2009 |
| Series/Report no.: | | CESifo working paper 2818 |
| Abstract: | | The ECB has been arguing in the past that since there is no trade-off between price stability and financial stability, the pursuit of price stability is the best a central bank can do to also maintain financial stability. We argue that there is a potential trade-off between price stability and financial stability. In order to make this trade-off less constraining we propose that the two-pillar strategy of the ECB should be reformed. In this new two-pillar strategy, the ECB should pursue two objectives, i.e. price stability and financial stability. In this new strategy the interest rate should be used to achieve the inflation objective, while other instruments (minimum reserve requirements and macro prudential control) should be used to achieve financial stability. |
| Subjects: | | inflation targeting financial stability two pillar strategy |
| JEL: | | E52 E53 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CESifo Working Papers, CESifo Group Munich
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