The linkages between monetary and macroprudential policies


Magnus Jonsson and Kevin Moran analyse how the monetary policy pursued by a central bank may be affected by a new policy area: macroprudential policy. They focus on a specific macroprudential policy tool, the so-called countercyclical capital buffer. This is a tool that is intended to increase the banks' resilience by building up a capital buffer in the upward phase of the financial cycle that is then put into play in the downward phase. It can thus have effects on the economy that monetary policy may need to take into account. Jonsson and Moran first analyse the business cycle effects of the capital buffer. They then go on to discuss the trade-off between the objectives of macroprudential policy and those of monetary policy and whether there is a risk of a conflict between these objectives.


The article is included in this year's first issue of the Sveriges Riksbank Economic Review, which has been published today.

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