Within a DSGE model, Vivien Lewis and Markus Roth demonstrate that, if macroprudential policy is too lax, monetary policy may be forced to do the job by driving inflation above its price stability target and reducing the real burden of private debt.10 Thus a stringent macroprudential reaction to financial stability risks is also a means to protect monetary policy.
To ascertain when we should adjust macroprudential tools, and by how much, we need to know how effective these tools are, and whether the transmission channel is subject to lags.