In addition, Bank research has examined the effectiveness of macroprudential and monetary policies to address vulnerabilities. See, for example, S. Alpanda and S. Zubairy, “Addressing Household Indebtedness: Monetary, Fiscal or Macroprudential Policy?” European Economic Review 92 (February 2017): 47–73.
When considering these shocks, it is important to distinguish how monetary and non-monetary policies influence the level of output and employment. In the model I employ, the Federal Reserve controls the real interest rate; lowering the real interest rate increases the demand for goods and services, and thereby influences national output and employment.