Macro-pru can help avoid ‘reversal interest rate’ – Bundesbank paper

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Central banks should use macro-prudential capital ratios to reduce the chances of monetary policy becoming ineffective, a research paper published by the Deutsche Bundesbank finds.

In Reversal interest rate and macro-prudential policy, Matthieu Darracq Pariès, Christoffer Kok and Matthias Rottner base their work on a 2018 paper by Markus Brunnermeier and Yann Korby. Brunnermeier and Korby defined the reversal interest rate as when “accommodative monetary policy reverses its intended effect and

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