As Jordà, Schularick and Taylor (2011, p. 1) observe, it was “an historical mishap that just when the largest credit boom in history engulfed Western economies, consideration of the influence of financial factors on the real economy had dwindled to the point where it no longer played a central role in macroeconomic thinking.”  1  See for example Taylor (1998) and Bernanke (2004). BIS central bankers’ speeches  1  Few traces of the debate on leaning against the wind A few years before the crisis a debate had arisen on whether central banks should raise their policy rates to counteract the rapid increases in asset prices that had been observed in several regions. Should central banks, as it was often expressed, “lean against the wind” to “burst bubbles” on the asset markets? But this debate made little mark on practical policy. The dominant opinion at this time, among both researchers and representatives of central banks, was that the central banks should not try to take preventive action, but make do with “cleaning up afterwards” if a crisis did occur. 2 It was considered too difficult and too costly to use the policy rate for preventive purposes. Moreover, it was considered – possibly with Japan as the exception that proves the rule – that it need not be so difficult to clean up after a crisis.
Something one should always bear in mind, but which I do not intend to discuss further here, is that decisions we make regarding conditions in Sweden must also be incorporated into a broader, European context. There are also a number of questions, particularly with regard to the interplay between macroprudential policy and monetary policy, that sooner or later may need to be dealt with in practice and it would be wise to have thought them through. Coordination... Some of the research into macroprudential policy – which is in general still in its infancy – tries to analyse the importance of coordinating macroprudential policy and monetary policy. The idea is roughly as follows: Monetary policy and macroprudential policy act through largely the same channels. Both the policy rate and most macroprudential tools affect, for instance, credit growth in the economy and developments in various asset prices. This also means that the two policy areas affect one another’s objectives. Monetary policy affects the credit cycle – which was the whole point of “leaning against the wind”, and macroprudential policy has effects on the business cycle. It is therefore desirable to find the right policy mix – the combination of policy rate and macroprudential tools that give the best overall outcome for the economy. The conditions for finding the right mix are normally improved if the two types of policy are coordinated, rather than determined separately. 14 The importance of coordination is also pointed out in more practical economic policy contexts.