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Monetary and macroprudential policies: trade-offs and interactions

Author

Listed:
  • Laeven, Luc
  • Maddaloni, Angela
  • Mendicino, Caterina

Abstract

There are always trade-offs to weigh up when taking monetary and macroprudential policy actions. Thechoice is between supporting the economy by ensuring a smooth supply of credit at favourableconditions, on the one hand, and containing financial stability risks, on the other hand. There are alsosignificant spillovers between the two policies since they are both implemented and transmitted throughthe financial system. Monetary and macroprudential authorities need to take these interactions intoaccount when deciding on interventions. Indeed, there are clear advantages of accounting for financialstability considerations when taking monetary policy decisions and limiting the constraints on the practicalimplementation of macroprudential policy. JEL Classification: E31

Suggested Citation

  • Laeven, Luc & Maddaloni, Angela & Mendicino, Caterina, 2022. "Monetary and macroprudential policies: trade-offs and interactions," Research Bulletin, European Central Bank, vol. 92.
    • Handle: RePEc:ecb:ecbrbu:2022:0092:
    Note: 261593
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    References listed on IDEAS

    as
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    6. Johannes Bubeck & Angela Maddaloni & José‐Luis Peydró, 2020. "Negative Monetary Policy Rates and Systemic Banks' Risk‐Taking: Evidence from the Euro Area Securities Register," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 52(S1), pages 197-231, October.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    bank regulation; financial stability; macroprudential regulation; monetary policy; policy spillovers;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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