BoE paper explores monetary and macro-prudential policy interactions
More than one policy tool needed to satisfy both macroeconomic and financial stability issues in some instances, paper suggests
When interest rates are the "only" policy instrument available, there can be a "policy trade-off" between macroeconomic policy and financial stability in response to "contractionary shocks", according to a working paper published by the Bank of England.
In Does easing monetary policy increase financial instability? Ambrogio Cesa-Bianchi and Alessandro Rebucci present a model where, when both macroeconomic and financial frictions are "at work" at the same time, it can "require interventions of
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