Monetary and macroprudential policies

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.

OTTAWA — More than anything, the financial crisis of 2008-09 was responsible for ushering in a new era of “creative thinking” by central bankers. That translated into near-zero interest rates, followed by rounds of quantitative easing — pumping massive amounts of money into financial systems — and providing monetary policy guidance well beyond the horizon. Now, some are casting even wider nets to include the direct oversight of financial institutions themselves. This is the case in the United States, European Union and the U.K.

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

That’s the title of a conference that took place at USC this weekend, co-organized by Joshua Aizenman, Menzie Chinn and Robert Dekle, and cosponsored by the USC Center for International Studies, USC

By Otaviano Canuto:If the global financial crisis -- and the events that led up to it -- have taught us anything, it is, "No complacency with asset price booms." We know firsthand the dire consequences of bubbles, so it is clear monetary policy makers can no longer passively observe the evolution of asset prices.

Today, we are fortunate to have a guest contribution by Ambrogio Cesa-Bianchi and Alessandro Rebucci. It is based upon Does Easing Monetary Policy Increase Financial Instability?.

Persistent economic weakness is sapping the ability of governments to tackle the growing threat of climate change and risks a global “perfect storm” of intertwined financial and ecological collapse, the World Economic Forum has warned.