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The nexus of macroprudential supervision, monetary policy, and financial stability

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  • Mester, Loretta J.

Abstract

I discuss changes to bank supervision and regulation since the financial crisis. Microprudential supervision promotes the safety and soundness of individual institutions, while macroprudential supervision focuses on emerging risks to financial system stability. I highlight tools for implementing this macroprudential approach to promoting financial stability, and discuss the interactions and proper relationship between monetary policy and financial stability. While macroprudential tools should be the first line of defense against emerging financial imbalances, in cases where those tools proved to be inadequate to limit risks to financial stability, monetary policy should be considered as a possible defense.

Suggested Citation

  • Mester, Loretta J., 2017. "The nexus of macroprudential supervision, monetary policy, and financial stability," Journal of Financial Stability, Elsevier, vol. 30(C), pages 177-180.
    • Handle: RePEc:eee:finsta:v:30:y:2017:i:c:p:177-180
    DOI: 10.1016/j.jfs.2017.07.003
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    3. De Grauwe, Paul & Saka, Orkun & Ji, Yuemei, 2020. "Financial Policymaking after Crises: Public vs. Private Interest," CEPR Discussion Papers 15413, C.E.P.R. Discussion Papers.
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    More about this item

    Keywords

    Banking supervision and regulation; Financial stability; Monetary policy; Macroprudential supervision;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • G2 - Financial Economics - - Financial Institutions and Services

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