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Sources of Financial Instability: Challenges for Monetary and Fiscal Policy | Claudio Borio

Hidden Forces

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Central Banks Need to Set Interest Rates

Why do central banks need to set interu straits? I understand the reason for the monetary back stop. And this brings us to a question about the natural rate again. Why is it at central banks, the contention is that are better at targeting the optimal rate as opposed to credit markets? What is the argument there for the need for central authority to set interest rates, to set the price of credit? i would put it to you that having central banks doing this, compared with any other system, is sir, is an improvement.

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