But Sherlock Holmes may have been equally successful without arresting innocent citizens – just with the help of science, logic, and his magnifying glass. However, since financial imbalances can jeopardise price stability, monetary policy should be aware of its ability to affect risk taking.
As we have learned painfully from the financial crisis, severe problems in the financial system could eventually spill over to the real economy and to inflation. Ideally, macroprudential policies can quell a fire before it turns into a blaze. We therefore need further research to find out how to make macroprudential tools as effective as possible.