Price stability may lead to economic instability, new framework suggests.
The neo-Wicksellian framework suggests that aiming for price stability can actually cause economic instability, as seen in recent financial crises. This theory argues that economic instability cannot be fully eliminated, only minimized. By creating a general theory that can explain various economic events like credit bubbles and depressions, investors can make better decisions. The framework aims to provide improved market signals for asset owners by understanding the nature of the business cycle.