Based on Japan's experience, how the negative feedback loop of tighter financial conditions, a decline in asset prices, and the deteriorating real economy will evolve could be key to the future course of the economy.
Challenges for monetary policy The recent and current episodes of financial turmoil in the past twenty years show that central banks face various challenges in the context of monetary policy as broadly defined by Friedman. 2  BIS Review 67/2008  The first challenge is how we should define and understand price stability which is an objective of monetary policy.