The reason is that differences across major economies in the strength of accommodative monetary policies, especially in response to a global crisis, can have economic spillover effects through the exchange rate. That is, even if countries adopt similar accommodative monetary policies in response to a major global economic shock, the relative strength of the policy responses will have repercussions.
I will start by discussing what is involved in defining and measuring macroprudential policies. Then, I will briefly review the empirical evidence on the effectiveness of their implementation and pinpoint some possible unintended consequences and long-term risks. I will end by touching on Mexico’s experience with prudential financial measures.