It works through the credibility of the central bank’s governance and through the way in which the central bank is seen – month after month – reacting systematically to the changing economy. In this way, agents start internalising this systematic behaviour in their expectations. But this process – easy as it sounds – is in fact very complex and reversible.
[12] Borio, C. (2016), “Towards a financial stability oriented monetary policy framework”, speech at the conference “Central banking in times of change” on the occasion of the 200th anniversary of the Central Bank of the Republic of Austria, 13-14 September. [13] Cerutti, E., Claessens, S. and Laeven, L. (2017), “The use and effectiveness of macroprudential policies: New evidence”, Journal of Financial Stability, 28, pp.