Central banks are actively engaged in determining how best to incorporate such financial stability concerns into the conduct of monetary policy. The analysis presented here has demonstrated that there is an intimate connection between the debt stocks embedded in financial stability issues and the monetary/fiscal policy mix.
Objectives for monetary policy, such as monetary or inflation targets, have historically been seen mainly as a recipe for staying out of trouble; in other words, they are meant to manage macroeconomic risks in the face of uncertainty, while delivering a less uncertain environment for economic decision making.