Macro-Prudential Policy and the Conduct of Monetary Policy (original) (raw)

The "Great Contraction" in global economic activity triggered by the financial crisis, and the extraordinary fiscal and monetary measures that public authorities had to undertake in order to put the economy back on track by putting public finances under heavy strains and leading to extremely low short-term interest rates, have shown the enormous costs resulting from an unstable financial system. Such costs have triggered wide-ranging reviews of financialstability policies. An important outcome of such a review is the strengthening of policies and instruments focused on macro-financial stability, the so-called "macro-prudential policies." The deployment of such policies may however raise important coordination issues with other stability-oriented policies, ranging from micro-prudential to monetary policies. Such coordination issues This paper benefited from the efforts of several colleagues from the Banque de France Monetary Policy Division (POMONE). We are particularly grateful to Pamfili Antipa, Julien Matheron and Eric Mengus. We are also grateful to Jean-Pierre Landau and Pierre Jaillet for comments and suggestions on earlier drafts. The views expressed in this paper are those of the authors and do not necessarily reflect the views of the Banque de France. All remaining errors are ours.