The fourth and last channel I will mention is the so-called risk-taking channel, relating to the potential impact of monetary policy on the risk-taking attitude of banks. An important element in the run-up to the current crisis seems to have been banks’ tendency to target a specific leverage ratio or a certain risk metric (e.g. the Value at Risk).
First, there is substantial consensus, backed by some historical and cross-country evidence, that there are strong complementarities between financial stability and macroeconomic stability. Second, a key issue in the design of financial sector reforms is the pace of reforms in the context of ensuring financial stability.