Monetary Policy and Macroprudential Policy: Different and Separate?

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 crises, Financial Stability, leaning against the wind

JEL Classification: E44, E52, E58, G01, G28