Abstract
Financial stability concerns cannot be separated from macroeconomic objectives of monetary policy. Stimulative monetary policy works by creating financial conditions that could lead to instability in markets that could, in turn, engender deflationary pressures. Although the Federal Reserve Act does not explicitly mention financial stability as an FOMC objective, it is fundamentally bound together with the achievement of the explicit goals of maximum employment and price stability.
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References
Federal Open Market Committee, 2016. Press Release, FOMC Statement, January 27. http://www.federalreserve.gov/monetarypolicy/files/monetary20160127a1.pdf (accessed March 5, 2016).
Fisher, Irving . 1933. “The Debt-Deflation Theory of Great Depressions.” Econometrica, 1 (4): 337–357.
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Prepared from remarks delivered at the session, “The Role of Financial Stability and Financial Conditions in Monetary Policy” at the National Association for Business Economics Economic Policy Conference, March 7, 2016.
*Peter R. Fisher is Senior Fellow at the Center for Global Business and Government at the Tuck School of Business at Dartmouth. He also serves as a Senior Director at the BlackRock Investment Institute. Mr. Fisher previously served as head of BlackRock’s Fixed Income Portfolio Management Group and as Chairman of BlackRock Asia. Prior to joining BlackRock in 2004, Mr. Fisher served as Under Secretary of the U.S. Treasury for Domestic Finance from 2001 to 2003. He also worked at the Federal Reserve Bank of New York from 1985 to 2001, concluding his service as Executive Vice President and Manager of the Federal Reserve System Open Market Account.
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Fisher, P. Financial Stability and the Hemianopsia of Monetary Policy. Bus Econ 51, 68–70 (2016). https://doi.org/10.1057/be.2016.12
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DOI: https://doi.org/10.1057/be.2016.12