Sound money and sound financial policy

Research output: Contribution to journalArticlepeer-review

3 Scopus citations

Abstract

Anna Schwartz has long promoted a policy of stable money. She also has advocated sound financial policy. The financial environment, according to her work, is strongly influenced by the degree of aggregate price stability. In this article historical evidence for the U.S. is presented that shows a strong association between aggregate price movements and measures of financial distress. Even in an environment of aggregate price stability in the face of shocks, however, a monetary authority should follow the financial policies of a lender of last resort as advocated over a century ago by Walter Bagehot - to promote adequate funds to allay the public's demand for means of payment in the face of a "real" financial crisis. Other circumstances involving asset market reversals that Schwartz calls "pseudo crises" should not be the subject of the monetary authorities' actions.

Original languageEnglish (US)
Pages (from-to)129-155
Number of pages27
JournalJournal of Financial Services Research
Volume18
Issue number2-3
DOIs
StatePublished - 2000
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics

Keywords

  • Aggregate price stability
  • Financial distress
  • Lender of last resort

Fingerprint

Dive into the research topics of 'Sound money and sound financial policy'. Together they form a unique fingerprint.

Cite this