White Paper No. 07, 2012

Systemic Risks and Central Banks

According to the draft of the German Financial Stability Act, the Bundesbank would be given a mandate for macroprudential oversight from 2013 onwards. This article discusses the role of central banks for financial stability in a broader context. It speaks out in favor of a role for monetary policy in the macroprudential framework. The author, however, cautions that research on the effects of macroprudential instruments is still in the beginning, and the manner in which macroprudential policies interact with monetary policy is not yet well understood.