It is true also that macro-prudential policy is not sufficient on its own to ensure financial stability, as we have seen with the euro zone debt crisis, where markets doubted the solvency of the sovereign and in this manner, fiscal policy led to financial instability. Nonetheless, I will focus purely on macro-prudential policy for now.
2  Balance sheet policies involve central banks using their balance sheets to influence broader economic and/or financial conditions, particularly when the policy rates have reached their zero limits.