Working Paper: CEPR ID: DP13043
Authors: Lars E.O. Svensson
Abstract: 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.
Keywords: financial stability; financial crises; leaning against the wind
JEL Codes: E44; E52; E58; G01; G28
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Monetary policy (E52) | Inflation (E31) |
| Monetary policy (E52) | Resource utilization (Q21) |
| Monetary policy (E52) | Financial stability (G28) |
| Macroprudential policy (E60) | Financial stability (G28) |
| Macroprudential instruments (E52) | Systemic risk (E44) |