Periodic and increasingly severe U.S. financial crises and panics motivated Congress to create the Federal Reserve System in 1913. Despite the fact that financial crises and banking panics were key elements that deepened the severity of the Great Depression, in its aftermath Federal Reserve policymakers placed less importance on financial stability concerns. Reflecting on the period between 1984 and 2007, known as the Great Moderation, in his remarks at the 2013 NBER conference on the Fed's centenary, Ben S. Bernanke noted that "financial stability did not figure prominently in monetary policy discussions during these years." However, the recent global financial crisis has placed the issue of financial stability risk at the forefront of domestic and international monetary policy debates.

But how does, and how should, monetary policy address the risks, and the occasional reality, of an unstable financial system? When financial strains do develop, is conventional monetary policy, operating through short-term interest rates, too blunt an instrument to be effective? An alternative response to financial instability is to use more targeted macroprudential policies to help achieve the goals of monetary policy—a solution which implies that macroprudential policies should be included in the arsenal of monetary policy tools. Yet this additional policy instrument would represent a change in perspective, insofar as the post-crisis debate about macroprudential policy has, for the most part, stressed its supervisory role. Thus, we need to form a better understanding of how macroprudential supervision relates to the more traditional conduct of monetary policy. These considerations raise several important questions. How, and how much, should the Fed and other central banks react to an increase in the risk of financial instability? How do financial intermediary regulation and bank supervisory policies interact with monetary policy? What are the tradeoffs in using macroprudential policies to achieve the Fed's dual mandate? Finally, should financial stability be included as a third mandate for U.S. monetary policy?

Answering these questions will help central banks decide how they should react when the specific needs of supervisory and monetary policies conflict. Central to these issues is how we should think about implementing macroprudential policies. Should the supervisory authorities have the foremost responsibility, or should macroprudential policies be primarily considered as instruments of monetary policy? In the United States, this raises the specific question of whether macroprudential policy decisions should be made by the Federal Open Market Committee (FOMC). This conference will address such questions from both a domestic and an international perspective.


October 2 & 3, 2015


Federal Reserve Bank
of Boston
600 Atlantic Ave
Boston, MA 02210


Photo of Tobias Adrian

Tobias Adrian
Federal Reserve Bank of New York

Photo of Richard Berner

Richard Berner
U.S. Department of the Treasury

Photo of William Dudley

William Dudley
Federal Reserve Bank of New York

Photo of Barry Eichengreen

Barry Eichengreen
University of California, Berkeley

Photo of Stanley Fischer

Stanley Fischer
Board of Governors of the Federal Reserve System

Photo of Mark Gertler

Mark Gertler
New York University

Photo of Anil Kashyap

Anil Kashyap
University of Chicago Booth School of Business

Photo of Sir Mervyn King

Sir Mervyn King
New York University

Photo of Narayana Kocherlakota

Narayana Kocherlakota
Federal Reserve Bank of Minneapolis

Photo of Donald Kohn

Donald Kohn
Brookings Institution

Photo of Luc Laeven

Luc Laeven
European Central Bank

Photo of Nellie Liang

Nellie Liang
Board of Governors of the Federal Reserve System

Photo of Loretta Mester

Loretta Mester
Federal Reserve Bank of Cleveland

Photo of Frederic Mishkin

Frederic Mishkin
Columbia University, Graduate School of Business

Photo of Joe Peek

Joe Peek
Federal Reserve Bank of Boston

Photo of Adam Posen

Adam Posen
Peterson Institute for International Economics

Photo of Eric Rosengren

Eric Rosengren
Federal Reserve Bank of Boston

Photo of Lars Svensson

Lars Svensson
International Monetary Fund

Photo of Geoffrey Tootell

Geoffrey Tootell
Federal Reserve Bank of Boston

Photo of Sir Paul Tucker

Sir Paul Tucker
Harvard University, John F. Kennedy School of Government

Photo of Kevin Warsh

Kevin Warsh
Stanford University