But it is only in recent years that researchers have managed to incorporate banking behaviour and economic policy in a dynamic general equilibrium model. These are the same type of models we use in the conduct of monetary policy. These models are also useful for macroprudential policy because we must understand both what is happening in the financial system and the real economy – simultaneously. Important advances have been made in modelling systemic risk and how various instruments can be used. This will help us in our thinking – for example in distinguishing between credit growth that is good and credit growth that is bad. So, even though theory lags behind reality to some extent, it is useful. Perhaps we can draw a parallel to Isaac Newton. The force of gravity as a phenomenon was hardly unknown before he formulated his theories, but they nevertheless proved to be very useful. A number of macroprudential instruments can be applied. In Norway, Finanstilsynet (Financial Supervisory Authority of Norway) has tightened the guidelines for sound residential mortgage lending. The risk weights for the capital banks must hold for residential mortgage loans have been adjusted upwards. Liquidity buffer requirements for banks are in the pipeline and stable funding and leverage ratio requirements will be introduced. The Ministry of Finance has implemented a systemic risk buffer for banks and the biggest banks are required to hold additional capital. Norges Bank gives advice to the Ministry of Finance on the size of the countercyclical capital buffer for banks.
Price stability is essential for sustained economic prosperity, and we are strongly committed to using our tools as needed to achieve our price stability and maximum employment goals. 1 International Monetary Fund, Database of Fiscal Policy Responses to COVID-19,  October 2021. 2 Olivier Armantier, Fatima Boumahdi, Leo Goldman, Gizem Koar, Jessica Lu, Giorgio  Topa, and Wilbert van der Klaauw, "Have Consumers' Long-Run Inflation Expectations Become Un-Anchored?," Federal Reserve Bank of New York Liberty Street Economics, September 24, 2021; Olivier Armantier, Leo Goldman, Gizem Koar, Giorgio Topa, Wilbert van der Klaauw, and John C. Williams, "What Are Consumers' Inflation Expectations Telling Us Today?," Federal Reserve Bank of New York Liberty Street Economics, February 14, 2022. 3 Olivier Armantier, Leo Goldman, Gizem Koar, Giorgio Topa, Wilbert van der Klaauw,  and John C. Williams, "What Are Consumers' Inflation Expectations Telling Us Today?," Federal Reserve Bank of New York Liberty Street Economics, February 14, 2022. 4 Board of Governors of the Federal Reserve System, Federal Reserve Issues FOMC  Statement, March 16, 2022. 5 Board of Governors of the Federal Reserve System, Summary of Economic  Projections, March 16, 2022. 4/5  BIS - Central bankers' speeches  6 Board of Governors of the Federal Reserve System, Principles for Reducing the Size  of the Federal Reserve's Balance Sheet, January 26, 2022. 5/5  BIS - Central bankers' speeches