-
Financial stability and monetary policy
In the winter of 2008, the Federal Reserve began an unprecedented campaign to combat the economic downturn. The mix of policy instruments included a near zero federal funds rate, explicit communication regarding the forward path of the funds rate, and a balance sheet that ballooned to more than $4 trillion as of this writing. With memories of the 2008-09 financial crisis still fresh, the policies have prompted concern for their effect on financial stability (Bernanke 2013, Stein 2013, Fisher 2014, Yellen 2014). Analysis of the possible trade-offs of financial stability requires understanding of how monetary policy ... (full story)