While recognizing the far-reaching effects of monetary policy on financial conditions, there are good reasons to view monetary policy as the second line of defense. It is better viewed as a complement to rather than an alternative to macroprudential tools. In many circumstances, standard monetary policy and financial stability considerations will reinforce one another.
801 (March, 2011)) show that MPMs are useful when financial or housing market shocks are a key source of instability; by contrast, in ‘normal’ times, the benefits of MPMs are modest. V. Nispi Landi, (‘Capital Controls, Macroprudential Measures and Monetary Policy Interactions in an Emerging Economy’, Banca d’Italia Working Paper No.