This paper contributes to the debate by showing that the relationship between the monetary policy stance and bank risk taking is more complex than generally believed. Most of the debate so far has focused on how monetary policy easing can induce greater risk taking through a search for yield or...

The recent financial crisis has led to a reexamination of policies for macroeconomic and financial stability. Part of the current debate involves the adoption of a macroprudential approach to financial regulation, with an aim toward mitigating boom-bust patterns and systemic risks in financial...

As for any form of government intervention, macroprudential policy should be justified by market failures. This paper discusses three key externalities across financial institutions and from financial institutions to the real economy that rationalize the need for macroprudential policy:...