The analysis also highlights the important role of fiscal policy in ensuring price stability in the face of adverse supply-side shocks. 19. This effect may be compounded by the absence of “creative destruction” during the crisis and increased spending on making supply chains more robust rather than more efficient. 20.
The foregoing brief review leads me to the conjecture that is the basis of this lecture: the combination of a liberalised financial system and a fiat standard with monetary rules based exclusively in terms of inflation is not sufficient to secure financial stability. This is not to deny that inflation is often a source of financial instability. It certainly is.