Macro-prudential rules targeting foreign exchange may achieve their primary objectives, but simultaneously shift problems elsewhere, according to a recent Bank of England working paper.

Toni Ahnert, Kristin Forbes, Christian Friedrich and Dennis Reinhardt test whether the rules “shift the snowbank” – shovelling risks from one place to another, rather than curbing them outright.

The authors built a model of bank and market funding along the lines proposed by Nobel laureates Bengt Holmstrom and