A REVIEW OF RESEARCH ON THE RELATIONSHIP BETWEEN MONETARY POLICY AND FINANCIAL STABILITY

Abstract

The traditional "Jackson Hole Consensus" suggests that monetary policy only responds to financial stability factors in special circumstances. However, some scholars argue that monetary policy indeed has an impact on financial stability and should be given special attention. The primary goal of the "Jackson Hole Consensus" monetary policy framework is to ensure economic and financial stability through stable inflation. In practice, financial system stability, financial innovation, and zero moral hazard have formed the new "impossible trinity" of financial stability. The "asymmetric intervention in asset price volatility" monetary policy control model may develop into a significant trigger for severe financial imbalances. Subsequent research needs to focus on: 1) whether monetary policy considers the constraints of financial stability, 2) the changing mechanisms through which monetary policy influences financial stability, 3) the asymmetric effects of monetary policy on financial stability, and 4) policy coordination in maintaining financial stability.