Central banks, monetary policy and financial stability

The "Great moderation" has led the economists and policymakers to believe that the monetary policy pursued in the late '80s and carried on until the financial crisis in 2007, is correct. The crisis, however, has forced them to rethink this concept. The aim of this paper is to present the elements that appear to currently outline a new framework for monetary policy, in which financial stability is an important goal. In the beginning of the paper, the monetary policy applied before the crisis by the major central banks of the world is presented. Next, the characteristics of the new monetary policy are analysed, wherein financial stability occupies an important role. This rethinking in regard to the role and functions of the central bank requires it to possess more human and technical resources to perform its new task, which is more complex than mere monetary stability. Also, this new monetary policy stance involves closing the links between the central bank and the supervisors and the exchange of information with all financial participants.