Instruments in The Redeemer's Hands

Timely investment advice from the investors who survived—and thrived—during the economic crisis

The European experience suggests that the efforts made to achieve an efficient trade-off between monetary policy and prudential supervision ultimately failed. The severity of the global crisis have pushed central banks to explore innovative tools—within or beyond their statutory constraints—capable of restoring the smooth functioning of the financial cycle, including setting macroprudential policy instruments in the regulatory toolkit. But macroprudential and monetary policies, by sharing multiple transmission channels, may interact—and conflict—with each other.

The European experience suggests that the efforts made to achieve an efficient trade-off between monetary policy and prudential supervision ultimately failed. The severity of the global crisis have pushed central banks to explore innovative tools—within or beyond their statutory constraints—capable of restoring the smooth functioning of the financial cycle, including setting macroprudential policy instruments in the regulatory toolkit. But macroprudential and monetary policies, by sharing multiple transmission channels, may interact—and conflict—with each other.

This book attempts to inform the reader in a comprehensive and accessible way about the analytical background and institutional setting of euro area monetary policy. Based on a rigorous description of selected financial markets and their driving forces, the theory and practice of monetary policy are explained in detail and illustrated by a number of up-to-date real world examples.