Journal of Financial Stability; F. Smets (2014) Financial stability and monetary policy: How closely interlinked?https://www.ijcb.org/journal/ijcb14q2a11.htm International Journal of Central Banking. 12 For an analysis of the role of low short-term interest rates in the GFC through their impact on risk-taking incentives, see J. Stein (2013) Overheating in Credit Markets: Origins, Measurement, and Policy Responses.
[17] Three broad observations speak in favour of central banks choosing the latter path: the uncertainty about the persistence of inflation, the threats to central bank credibility and the potential costs of acting too late. Uncertainty about inflation persistence requires a forceful policy response The first observation relates to how central banks should act in the current environment of large uncertainty.