The Bank of England-Financial Services Authority (FSA) discussion paper, Instruments of Macro-Prudential Policy, released on December 20, 2011, sets out current official thinking on how the empty shelves in the arsenal of macro-prudential policy weapons are to be filled. But the discussion paper fails even to mention, let alone discuss, what is perhaps the most powerful macro-prudential policy weapon available to a central bank, namely its own purchasing power.
Central banks require a policy on
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