We cannot deny the importance of making efforts to avoid a coordination failure, but it seems more productive for each policymaker around the globe to address the common factors causing crises. In that regard, we should take seriously the fact that the frequency of crises has increased in the last 20 years, and the crises have also become increasingly globalized.
For those reasons, it seems natural to reflect on the relationship between that fact and conventional wisdom underpinning monetary policy, and financial regulation and supervision. Put it simply, the prevailing philosophy among central banks and other policy authorities rests on three forms of “pre-established harmony,” if you please. First, macroeconomic stability can be achieved by monetary policy, which pursues low and stable inflation.