Central Banks, Financial Regulators, and the Quest for Financial Stability

IMF Blog, November 7, 2011

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Central Banks, Financial Regulators, and the Quest for Financial Stability

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Bibliographic details

• Authors: Olivier Blanchard
• Published: November 7, 2011

Conference overview

• Title: Central Banks, Financial Regulators, and the Quest for Financial Stability
• Event: 2011 IMF Annual Research Conference
• Author/speaker: Olivier Blanchard
• Date: November 7, 2011
• Focus: Interaction between monetary and macroprudential policies and their role in achieving macroeconomic and financial stability.

Motivation and context

• The global financial crisis prompted a fundamental rethinking of macroeconomic policy and how many policy instruments work together.
• Interactions between monetary and macroprudential policies remain "hotly debated."
• Past conference papers on post-crisis macroeconomic and financial policies have been immediately relevant to real-world events (example cited: paper on fiscal space relevant to the European sovereign crisis and U.S. budget debates).

Key themes and questions for debate

• Whether monetary policy should "lean against credit and asset price bubbles" or delegate that task to macroprudential policy.
• The implications if macroprudential policy is only "partially effective" due to regulatory arbitrage and other "leakages" — whether monetary policy should then "weigh in" as well.
• Challenges when the government lacks full information on the riskiness of new financial instruments and the ability to set effective macroprudential policies for lasting financial stability.
• How monetary tightening might encourage excessive risk-taking by financial institutions in distress at higher interest rates.
• Coordination of macroprudential policies internationally when they have cross-border repercussions.
• The role of international factors in determining domestic financial conditions, including cross-border intermediation (to be addressed in the Mundell-Fleming keynote).

Program highlights

• Keynote Mundell-Fleming address: Professor Hyun Song Shin (Princeton University) — will discuss the role of international factors in domestic financial conditions, with an example of European global banks intermediating U.S. dollar funds easing U.S. credit conditions.
• Eleven other papers on the program addressing critical aspects of the intersection between monetary and macroprudential policies.
• Policy-oriented events:
  • Opening remarks by David Lipton, IMF First Deputy Managing Director.
  • Luncheon speech by Jean-Pierre Landau, Second Deputy Governor of the Banque de France — reflecting on central banks' evolving role in maintaining financial stability.
  • Concluding Economic Forum on “Monetary and Macroprudential Policies: Challenges and Solutions” featuring a panel including Lewis Alexander (Nomura), Joe Gagnon (Peterson Institute of International Economics), Andrew Lo (MIT), and John Williams (Federal Reserve Bank of San Francisco).

Objectives and expected outcomes

• Advance debate and research on how monetary and macroprudential policies interact.
• Engage academics, policymakers, and private sector practitioners to expand the frontier of knowledge on monetary–macroprudential interactions.
• Contribute to new policy thinking within the IMF and among economists and policymakers more broadly.
• Selected conference papers to be featured in the IMF Economic Review.

Participation and access

• Papers are posted online for reading.
• The Economic Forum will be broadcast on www.imf.org and readers are invited to comment.

Source: Olivier Blanchard, "Central Banks, Financial Regulators, and the Quest for Financial Stability," 2011 IMF Annual Research Conference, November 7, 2011.

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• Agjkemjomq
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• hss
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• Monetary and Macroprudential Policies
  • Monetary and Macroprudential Policies (Markdown version)
  • Monetary and Macroprudential Policies (PDF)

References

• future of macroeconomic policy
• https://www.imf.org/wp-content/uploads/2011/11/2011arc-poster.jpg
• monetary and macroprudential policies
• last year’s conference
• post-crisis macroeconomic and financial policies
• David Lipton, the IMF’s First Deputy Managing Director,
• Economic Forum on “Monetary and Macroprudential Policies: Challenges and Solutions
• Pierre-Olivier Gourinchas
• www.imf.org