It is important to recognise that membership of a monetary union increases the likelihood of excessively low risk premia and a pro-cyclical behaviour of real interest rates, which might temporarily slow down or even destabilise the structural adjustment process. Indeed, within a monetary union, forces exerting upward pressures on inflation tend to become self-sustained and more likely to give rise to an abrupt adjustment.
Macroprudential instruments and institutions that take regulatory action were only established in many countries in the wake of the Global Financial Crisis. Central banks typically have an important role to play in financial stability policymaking, but they are not the only actors, not least because macroprudential policies can have distributional consequences and thus require democratic legitimacy.