Price stability and financial stability in the context of EUROSYSTAM’s monetary policy

Anca Bandoi, Dorel Berceanu, Dana Danciulescu
European Research Studies Journal, Volume XII, Issue 4, 19-36, 2009
EOI: 10.11214/thalassinos.12.04.002

Abstract:

In this article we propose to review some aspects of the relationship between price stability and financial stability in the current economic context. It is acknowledged that monetary policy of the EUROSYSTEM still have as the main objective the price stability, this being one of the most important ways of supporting sustainable economic growth. Although there are many theoretical approaches of the price stability concept all converging towards the idea of measuring and control of permanent inflation. Financial stability can be seen in the broad sense as the situation in which the financial system may ensure the efficient allocation of savings to investment opportunities and may face the shock without major disruptions. Viewed from this perspective the increased complementarity between price stability and financial stability is associated with economic globalization and, in particular, eliminating impediments to the free movement of capital flows. On the other hand the financial stability may be defined as a situation characterized by the absence of banking crises and by the existence of a certain level of price stability of the assets, including interest rates.


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