This arrangement, called “window guidance” was then regarded as a tool for monetary policy, but under the current taxonomy, it would be regarded as a time-varying macroprudential policy tool, akin to regulation of loan-to-value (LTV) or debt-to-income (DTI).
There were two schools of thought regarding the effectiveness of the tool: the “independent tool theory,” which held that window guidance was effective by itself, and the “complementary tool theory,” which held that window guidance had to be used alongside the mainstream monetary policy of official discount rate adjustments to be effective.