By Alejandro Van der Ghote
Short-term interest rates, particularly the natural rate, have been in steady decline in the euro area and the US. This column argues that in economies with low natural rates, such as the euro area today, macroprudential policy can have benefits for the effectiveness of conventional monetary policy, in addition to safeguarding financial stability. Notably, macroprudential policies that curb leverage of financial intermediaries during upturns can also help stimulate aggregate demand during downturns, by containing systemic risk in financial markets.
Link: Benefits of macroprudential policy in low interest rate environments