Université de Fribourg

Price stability and financial imbalances: rethinking the macrofinancial framework after the 2007-8 financial crisis

Panzera, Fabio S.

(Working Papers SES ; 423)

During the two decades preceding the 2007-8 financial crisis, both advanced and emerging market economies experienced larger credit growth and asset price fluctuations than in the more distant past. These phenomena were largely due to the establishment of credible inflation targeting regimes, whose excessive focus on medium-run price stability bred unsustainable credit and asset price dynamics,...