The role of macro-prudential policies in prevention and correction of asset imbalances in the Euro Area : in-depth analysis

In the aftermath of the financial crisis, there is consensus among academics and policy makers on the need for the so-called macroprudential policies. Additionally, the current low interestrate environment creates further risks to financial stability. However, the implementation of such policies in a monetary union is a rather complex issue. Housing and credit markets heterogeneity across countries calls for action at national level. The role of the ECB in macroprudential policy is a matter of debate because monetary policy can conflict with the ultimate goal of macroprudential policy. This document reviews the key issues that are relevant for the implementation of macroprudential policies in the euro area and questions the current institutional framework. Finally, it gives some policy recommendations on how to improve the current situation.