Abstract

There is a broad consensus that a central bank has to be independent of politics and that its primary objective is to ensure price stability. Financial crises, however, refuel the debate about the roles of monetary policy. This is because financial bubbles can also develop in a low-inflation environment. One possible role of monetary policy in ensuring financial stability points towards trade-offs and co-ordination problems. Furthermore, the debate underlines the shortcomings in the case for central bank independence.