There is a new and now extensive literature analyzing government policies for financial stability based on models with endogenous borrowing constraints. These normative analyses often build upon the concept of constrained efficient allocation, where the social planner is constrained by the same...

We study the interplay of optimal ex-ante (macroprudential) and ex-post (monetary or fiscal stimulus) measures to respond to systemic financial crises in a tractable model of fire sales. We find that it is generally optimal to use both, rejecting the Greenspan doctrine to only intervene ex post....