The commpliance of price stability, financial stability and financial efficiency

Abstract

The current financial crisis has prompted significant debate around the proper management of monetary policy and its role in preventing financial crises, particularly when they grow to the size of the one we are now seeing in developed economies. That’s why we think that it is very important to look upon the role that central banks play in both price stability and financial stability. It is interesting to note that financial stability has been overlooked for so long, or has been the secondary goal of the of central banks. Some people even though that the only objective of central banks was price stability. However, at their origin, these institutions were created precisely to deal with the financial instability caused by frequent bank runs in the late 19th and early 20th century. Furthermore, the concern of price stability was even institutionalized later on around the world, with the inflation targeting regime being the latest stage of its development.price stability, financial efficiency, the management of monetary policy, central banks policies