Optimal policy changes as financial inclusion rises, BIS paper finds

Monetary policy should lean more towards price stability

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The BIS tower in Basel

The optimal course for monetary policy shifts as financial inclusion rises, according to research published today by the Bank for International Settlements (BIS).

The working paper, Financial inclusion and optimal monetary policy, by Aaron Mehrotra and James Yetman, uses a model where financially included households are able to smooth their consumption, while those that are excluded consume 100% of their income each period.

The assumption is not as strong as it sounds – research by the World

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