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Simple Rules for Financial Stability

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  • John Taylor

    (Stanford University)

Abstract

This paper considers three simple rules-based strategies to improve and maintain financial stability. The first reforms the rules of bankruptcy to handle large financial institutions with a minimum of disruption. The second would focus macro-prudential policy on setting permanent and appropriate capital and subordinated debt ratios rather than discretionary countercyclical adjustments. The third would re-establish a rules-based monetary policy. Taken together these three reforms would constitute a sound overall strategy to improve financial and economic stability.

Suggested Citation

  • John Taylor, 2013. "Simple Rules for Financial Stability," Discussion Papers 12-031, Stanford Institute for Economic Policy Research.
    • Handle: RePEc:sip:dpaper:12-031
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    File URL: http://www-siepr.stanford.edu/repec/sip/12-031.pdf
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    References listed on IDEAS

    as
    1. John B. Taylor, 2013. "A Review of Recent Monetary Policy," Economics Working Papers 13103, Hoover Institution, Stanford University.
    2. Darrell, Duffie, 2010. "The Failure Mechanics of Dealer Banks," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 4, pages 131-153.
    3. Kenneth E. Scott & John B. Taylor (ed.), 2012. "Bankruptcy Not Bailout," Books, Hoover Institution, Stanford University, number 5.
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    Cited by:

    1. Günes Kamber & Özer Karagedikli & Christie Smith, 2015. "Applying an Inflation-Targeting Lens to Macroprodential Policy "Institutions"," International Journal of Central Banking, International Journal of Central Banking, vol. 11(4), pages 395-429, September.

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