Some Notes on Safeguarding Financial Stability

Among the issues raised by Prof. Nachane in his exhaustive and thought-provoking discussion of the post-2008 thinking on financial stability, I shall consider only those that mark a major departure from the pre-crisis conventional wisdom. The most important of these issues relate to macro-prudential policies and may be classified, following Prof. Nachane, under these groups: 
(a) monetary policy response to asset price bubbles; 
(b) pro-cyclicality of bank credit; and 
(c) international policy coordination.