US policy rates and financial stability

In the wake of the financial crisis, some US policy makers understood that the economics profession had erred in not taking debt aggregates and financial stability into account when conducting macroprudential regulation and making economic policy. As a result, increasing research and policy focus has been directed at how to maintain financial stability. Yet, not everyone gets it. Some people want the Fed to continue down the path of loose monetary policy and easy money that created the crisis and completely disregard financial stability.
A perfect example of this kind of thinking comes from Ryan Avent at the Economist. Ryan has been a loud proponent of dovish Fed policy, arguing at each stage of the game that the Fed is not doing enough to reduce unemployment and boost the real economy. H...


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