Central bank focus on price stability reduces banking crises risk worldwide.
The article looks at how the way a country's central bank sets its goals and strategies for monetary policy can affect financial stability. By studying data from 79 countries between 1970 and 2000, the researchers found that focusing on keeping prices stable can help prevent banking crises. They also discovered that targeting exchange rates can reduce the likelihood of a banking crisis in certain situations, especially for countries going through transitions.