Interaction of macroprudential and monetary policies: practice ahead of theory

Thibaut Duprey, Yaz Terajima and Jing Yang

Chapter 17 in Research Handbook of Macroprudential Policy, 2026, pp 384-412 from Edward Elgar Publishing

Abstract: This article highlights how monetary and macroprudential policy interact and possibly complement each other towards achieving their respective price and financial stability objectives. To this end, we first review the Canadian experience of housing market cycles to highlight the need to coordinate the two sets of policies. We then discuss ongoing frontier policy-relevant research that aims to deepen our understanding of policy interactions by going over research work at the Bank of Canada as well as from the literature. Finally, we emphasise remaining gaps where continuous effort by central bank and academic research is needed to further develop a modelling framework that unifies both price and financial stability objectives with explicit interactions between monetary and macroprudential policies.

Keywords: Monetary policy; Macroprudential policy; Financial stability (search for similar items in EconPapers)
Date: 2026
ISBN: 9781035306206
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