Monetary and macro-prudential co-ordination works well when pulling in same direction
Monetary policy alone could not have stopped the credit crunch
A new working paper from the National Bank of Belgium demonstrates how monetary policy alone could not have prevented the credit crunch of 2008, but a macro-prudential regulatory tool in addition to monetary policy "would have been crucial to safeguarding a stable macroeconomic environment".
In Monetary and macro-prudential policies in an estimated model with financial intermediation, Paolo Gelain and Pelin Ilbas study the interaction between macro-prudential policy, aimed at stabilising nominal
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