Central banks are increasingly struggling to control domestic financial conditions due to the high power of the global financial cycle, but macro-prudential tools could help, according to Tobias Adrian and Hélène Rey.
Adrian, the International Monetary Fund’s financial stability chief, presented evidence that global and domestic financial conditions have shown a very close correlation since the 2008 crisis, moving in lockstep 80–90% of the time.
He noted that even house prices – a “quintessent
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