Jeremy Stein's Mundell-Fleming Lecture. Worth watching for thoughts on credit cycles, including the relative roles of macroprudential and monetary policy in taming the cycle imf.org/en/News/Semina…
A few points worth thinking more about:
- It's important to remember that garden-variety business cycles have an important element of credit supply shocks as one of the drivers or amplifiers. It’s not just about the severe crises like the Great Recession of Depression.
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- It's important to remember that garden-variety business cycles have an important element of credit supply shocks as one of the drivers or amplifiers. It’s not just about the severe crises like the Great Recession of Depression.
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- The world is second best, and so are our policy tools. There is probably not a clean separation between using monetary policy to stabilize inflation and macropru to stabilize the financial sector. Monetary policy should think about financial risks alongside macropru.
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- Macropru is imperfect, and the efficacy of macropru varies across countries and contexts. One key dimension of heterogeneity is in political economy. Since these policies have distributional consequences, the extent to which they can be used will depend on PE factors.
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Lots here to think more about and carefully research!
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