Report
Patrick Artus

Are there conflicts of objectives for central banks?

Central banks (we look at the cases of the Federal Reserve and the ECB) have as possible objectives: Price stability; Asset price stability (absence of a bubble); Making it easy to run up large fiscal deficits; Absence of excess household and corporate debt; Full employment. For there to be no conflict between these objectives, the following conditions must be met: Goods and services prices and asset prices must move in parallel; If debt increases rapidly, then inflation must be high at the same time; Inflation must be low when fiscal deficits are high and unemployment is high. Statistical analysis shows the following conflicts of objectives for the central bank: In the United States, the conflict between price stability and asset price stability or debt control; In the euro zone, the conflict between price stability and all other possible central bank objectives. So there are multiple conflicts of objectives for the central bank, especially in the euro zone.
Provider
Natixis
Natixis

Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.

 

Analysts
Patrick Artus

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