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Monetary Stability Versus Financial Stability In Adjusting The Real Economy

Author

Listed:
  • Boldea Bogdan

    (West University of Timisoara, Faculty of Economics and Business Administration)

  • Gheorghe Roxana-Maria

    (Faculty of Economics and Business Administration)

  • Ivanovici Daniela-Cecilia

    (Faculty of Economics and Business Administration)

  • Strezariu Iulia Ana-Maria

Abstract

Nowadays, in the economic theory and practice, there's commonly held idea that the primary objective of monetary policy should be price stability. However, the possibility of achieving this goal depends on the development and stability of the financial system. Even though financial stability represents a prerequisite for reaching the objective of price stability, the relationship manifests itself in reverse also. In the long term, the two objectives support and reinforce each other, but in the short term, there may occur certain incompatibilities, thus resulting in the central bank's dilemma of abandoning one in favor of the other. This paper aims to investigate precisely the circumstances in which the policies pursued to ensure price stability can cause or worsen financial stability.

Suggested Citation

  • Boldea Bogdan & Gheorghe Roxana-Maria & Ivanovici Daniela-Cecilia & Strezariu Iulia Ana-Maria, 2010. "Monetary Stability Versus Financial Stability In Adjusting The Real Economy," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(2), pages 678-684, December.
    • Handle: RePEc:ora:journl:v:1:y:2010:i:2:p:678-684
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    File URL: http://anale.steconomiceuoradea.ro/volume/2010/n2/107.pdf
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    More about this item

    Keywords

    price stability; financial stability; central bank; monetary policy; National Bank of Romania;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G01 - Financial Economics - - General - - - Financial Crises

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