Seeing Double at Central Banks
In the wake of the recent global financial crisis, macroprudential regulation is the new term of art among central bankers, supplementing (or supplanting?) their inflation-targeting regimes. This shift in focus could radically change monetary policy, but for better or worse?
OXFORD – Central banks are now targeting liquidity, not just inflation. The credit boom of the past decade highlighted the inadequacy of focusing only on prices, and underscored the need for the monetary authority of a country (or group of countries in the case of the European Central Bank and the eurozone) to monitor the financial sector. Macroprudential regulation is the new term of art among central bankers, supplementing their well-established inflation-targeting regimes.
OXFORD – Central banks are now targeting liquidity, not just inflation. The credit boom of the past decade highlighted the inadequacy of focusing only on prices, and underscored the need for the monetary authority of a country (or group of countries in the case of the European Central Bank and the eurozone) to monitor the financial sector. Macroprudential regulation is the new term of art among central bankers, supplementing their well-established inflation-targeting regimes.