TY - JOUR AU1 - Nasir, Muhammad Ali AU2 - Ahmad, Mushtaq AU3 - Ahmad, Ferhan AU4 - Wu, Junjie AB - Purpose – The purpose of this paper is to provide a different context for considering issues of financial stability and instability, with reference to economic growth and price stability in particular. Design/methodology/approach – This paper pursued an empirical exploration of six pillars of financial stability, based on a data set for the UK extending from 1985 (Q1) to 2008 (Q2), through the construction of a vector error correction model, including an impulse response function analysis. Findings – The findings show a strong association between the financial and economic stability even in a non-crisis regime. This includes, for example, a strong association exists between the stock market and the real economy; exchange rate appreciation may not provide for long-term real economic growth; inflation does not contribute to real economic growth, both the sensitivity of the economy to yields and a significant lag in transitional effects from financial markets to the real sector; a positive role of credit creation within a non-crisis regime; exchange rate appreciation affects purchasing power; and potential points of linkage between sovereign debt activity and general price levels. Research limitations/implications – The findings should be considered in the context of a concept of the economy as fundamentally dynamic and subject to complex cumulative processes. Practical implications – The findings indicate there is a role for state oversight and intervention within a non-crisis regime based on the complexity of possible interactions that may undermine financial and price stability, with consequences for their association with economic growth. Originality/value – The study provides a new perspective for considering issues of financial stability and instability. TI - Financial and economic stability as ‘two sides of a coin’ JF - Journal of Financial Economic Policy DO - 10.1108/JFEP-01-2015-0006 DA - 2015-11-02 UR - https://www.deepdyve.com/lp/emerald-publishing/financial-and-economic-stability-as-two-sides-of-a-coin-sIBdY28xnr SP - 327 EP - 353 VL - 7 IS - 4 DP - DeepDyve ER -