Publication: How Complementary Are Prudential Regulation and Monetary Policy?
Date
2011-06
ISSN
Published
2011-06
Author(s)
Abstract
Could either monetary policy or
financial prudential regulation be relied on individually to
mitigate asset price cycles or their effects? If both ways
are effective, monetary policy and prudential regulation
could then be considered 'substitutes,' in the
sense that the individual use of either instrument leads to
a reduction in the volatility of both corresponding targets.
This note, however, argues in favor of complementarily
rather than substitution in the use of monetary and
macro-prudential policies: the combined (articulate) use of
both policies tends to be more effective than a standalone
implementation of either.
Citation
“Canuto, Otaviano. 2011. How Complementary Are Prudential Regulation and Monetary Policy?. Economic Premise; No. 60. © World Bank, Washington, DC. http://openknowledge.worldbank.org/entities/publication/0b64140b-a10a-531c-8b96-70eeddffe4f8 License: CC BY 3.0 IGO.”