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The relationship between monetary and financial stability

Author

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  • Leni Hunter

    (Reserve Bank of New Zealand)

Abstract

The Reserve Bank of New Zealand takes distinct actions in order to pursue its goals of monetary and financial stability. However, it is necessary to have coordination between actions taken towards each goal, as the achievement of each depends on the other – inappropriate monetary policy can threaten financial stability, and the maintenance of price stability requires a stable financial environment. Policy actions taken for both goals should be consistent and mutually reinforcing where possible. For example, in some circumstances monetary policy may be used to proactively counter potential asset bubbles, and the use of financial stability tools may lend support to monetary policy’s function of stabilisingthe business cycle.

Suggested Citation

  • Leni Hunter, 2008. "The relationship between monetary and financial stability," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 71, June.
    • Handle: RePEc:nzb:nzbbul:june2008:4
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    File URL: http://www.rbnz.govt.nz/-/media/ReserveBank/Files/Publications/Bulletins/2008/2008jun71-2hunter.pdf
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    Citations

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    Cited by:

    1. John Muellbauer, 2010. "Household decisions, credit markets and the macroeconomy: implications for the design of central bank models," BIS Working Papers 306, Bank for International Settlements.
    2. Sunday Nyong Essien & Sani Ibrahim Doguwa, 2015. "Development and compilation of macroprudential indicators for financial stability and monetary policy in Nigeria," IFC Bulletins chapters, in: Bank for International Settlements (ed.), Indicators to support monetary and financial stability analysis: data sources and statistical methodologies, volume 39, Bank for International Settlements.
    3. Yucel, Eray, 2011. "A Review and Bibliography of Early Warning Models," MPRA Paper 32893, University Library of Munich, Germany.
    4. Susan Schroeder, 2009. "Defining and detecting financial fragility: New Zealand's experience," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 36(3), pages 287-307, February.

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