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The Challenge of Economic Rebalancing in Europe

The Challenge of Economic Rebalancing in Europe

Perspectives for CESEE Countries

Edited by Ewald Nowotny, Doris Ritzberger-Grünwald and Helene Schuberth

In the long aftermath of the acute global financial crisis of 2008/09, “rebalancing” the economy with new sources of growth and productivity remains a persistent necessity. This book addresses the resulting trade-offs and challenges. These needs, and the corresponding policy challenges, are especially prevalent in Europe, in particular Central, Eastern and South-Eastern Europe. On this issue, this book contributes lessons learned from earlier balance sheet recessions. It also addresses the often overlooked link between macroeconomic imbalances and economic inequality. Further contributions focus on the interaction between monetary policy and financial stability, adding a regional perspective to these important issues.

Chapter 13: What can monetary policy achieve, and what is the relation between monetary policy and financial stability?

Lars E.O. Svensson

Subjects: economics and finance, financial economics and regulation, international economics, money and banking


In this chapter, I will discuss two questions. First, what can – and cannot – monetary policy achieve? Second, what is the relation between monetary policy and financial stability, and how can, if necessary, monetary policy and financial stability policy be coordinated?

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