A working paper, published by the European Central Bank in July, studies the interaction of monetary and macro-prudential policies, and argues that co-ordination of policy regimes can improve outcomes.

The authors, Paolo Angelini, Stefano Neri and Fabio Panetta, use a dynamic general equilibrium model to examine the links between monetary and macro-prudential policy, as the two regimes both influence variables such as asset prices and credit. The paper finds that co-ordinating policies to avoid