Abstract：

In this paper, we discuss the interaction between monetary policy and macroprudential policy from both theoretical and practical perspectives based on a literature review, identify the problems and challenges facing the current “twin-pillar” regulatory framework in China and propose a number of reform measures. While monetary policies affect financial stability through the risk-taking channel, macroprudential policies affect price stability and output. Recent studies suggest that, depending on the types of shocks and parameter calibrations, monetary policy instruments and macroprudential instruments are either substitutes for each other, or complementary to each other.

Full Text: On Coordination between Monetary and Macroprudential Policies