DP13043 Monetary Policy and Macroprudential Policy: Different and Separate?

Author(s): Lars E.O. Svensson
Publication Date: July 2018
Keyword(s): Financial crises, Financial Stability, leaning against the wind
JEL(s): E44, E52, E58, G01, G28
Programme Areas: Monetary Economics and Fluctuations
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=13043

The paper discusses how monetary and macroprudential policies can be distinguished, how appropriate goals for the two policies can be determined, whether the policies are best conducted separately or coordinately and by the same or different authorities, and how they can be coordinated when desired. The institutional frameworks in Canada, Sweden, and the UK are briefly compared. The Swedish example of monetary policy strongly "leaning against the wind" and the subsequent policy turnaround is summarized, as well as what estimates have been found of the costs and benefits of leaning against the wind.