Instant cuts the right response to instability

Monetary policy that responds instantly to increased credit risk performs better than a policy that follows the traditional Taylor rule, research published by the International Monetary Fund finds.

The research extends the standard new Keynesian dynamic stochastic general equilibrium model with sticky prices to include a financial system. The simulations suggest that, if financial instability affects output and inflation with a lag and if the central bank has privileged information about credit

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact or view our subscription options here:

You are currently unable to copy this content. Please contact to find out more.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to Central Banking? View our subscription options

You need to sign in to use this feature. If you don’t have a Central Banking account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account