Monetary and macroprudential policies

Stijn Claessens, Fabian Valencia, 14 March 2013Inflation targeting once seemed sufficient, yet since the Global Crisis maintaining financial stability and price stability has required more than one monetary-policy tool. We are witnessing the rise of macroprudential policy. This column discusses how monetary and macroprudential policies interact and what it means for policy and institutional design.

Fed Chair Janet Yellen says that despite concerns about rising asset prices and low volatility, monetary policy should not be subject to financial stability concerns.  Yellen is speaking at an inaugural central banking lecture at the IMF in Washington.

Otaviano Canuto, Matheus Cavallari, 21 May 2013The global financial crisis has shattered the confidence of many established principles of monetary policy and financial supervision. This column argues that the two should not remain separate, and maps out the major challenges faced by their complementary implementation.Full Article: Integrating monetary policy and macroprudential regulation

The Bank of England's most consistently interesting economist had some bad news today for anyone worried about the problem of global imbalances. He thinks that those current-account imbalances are likely to get bigger, probably a lot bigger, in the next 10 to 20 years - and there may not be very much that anyone can do about it.

Massimo Libertucci, Mario Quagliariello, 24 February 2010How much “freedom” should policymakers have? This column discusses to what extent the experience gained from monetary policy can help to define how macroprudential policy should be implemented.Full Article: Rules vs discretion in macroprudential policies

These topics are the subject of two special issues, the first in IMF Staff Papers, and the second in the Review of International Economics.

The IMF finally had a "duh" moment in what should have been obvious in years ago. The IMF finally realizes that almost zero borrowing costs has encouraged speculation rather than hoped-for pick up in investment.Now, the IMF warns period of ultra-low interest rates poses fresh financial crisis threat.

Ben Bernanke on how the bank panic of 2007 is similar to the panic of 1907: