Adrian and Rey: macro-prudential tools needed to resist ‘bad booms’
Economists say monetary policy cannot fully control local conditions
Central banks are increasingly struggling to control domestic financial conditions due to the high power of the global financial cycle, but macro-prudential tools could help, according to Tobias Adrian and Hélène Rey.
Adrian, the International Monetary Fund’s financial stability chief, presented evidence that global and domestic financial conditions have shown a very close correlation since the 2008 crisis, moving in lockstep 80–90% of the time.
He noted that even house prices – a
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