Summary:
This study attempts to sort out some important changes in the philosophy of global financial management that emerged after the international financial crisis. It focuses on the theoretical basis and intrinsic logic of the two-pillar macro-management framework that combines monetary policy with macroprudential policy. In the aftermath of the 2008 international financial crisis, the importance of financial stability in the central bank's policy framework has once again been recognized, and together with a currency stability target, it has become part of the central bank's “double-target” policy portfolio. The policy objectives of the central bank have gone through a process of negation and spiraling. Changes in policy objectives require the optimization and improvement of the policy toolbox. In this case, there are multiple options. One is to strengthen the original monetary policy's function and incorporate financial stability responsibilities into the traditional monetary policy framework, for example by focusing on overall price stability in a broader sense including asset prices. However, in the current situation, there are obvious shortcomings to relying solely on monetary policy to maintain financial stability and prevent systemic risks. Based on the consensus of a range of economists after the crisis, to manage and prevent systemic risks and maintain financial stability, it is necessary to strengthen the macroprudential policy framework. Monetary policy and macroprudential policy have different focuses; however, they do not operate separately, but are interactive. When they are coordinated, they can form a synergy; this is the basis of the “two-pillar” framework. China has proposed and is now improving a two-pillar macro-management framework that combines monetary policy and macroprudential policy; this is an important achievement that reflects the lessons of the international financial crisis. The two-pillar framework is an important theoretical and practical innovation that addresses China's national conditions. In our opinion, the two-pillar framework is an indication that monetary policy and macroprudential policy are both indispensable for fulfilling the target portfolio of currency and financial stability. Monetary policy cannot replace macroprudential policy, and vice versa. They are like the two pillars supporting a bridge: although their respective positions and forces are different, they are both indispensable. Moreover, the two pillars may be equally important. It is also possible that one of them will be more important for a certain period, while the other will play a supporting role. As the situation and the focus of policy objectives change, the relative importance of the pillars may vary. However, both pillars are essential, and the fundamental policy framework of two pillars supporting double targets should remain constant. Many studies have discussed the theoretical foundations of a two-pillar framework or studied the coordination of monetary policy and macroprudential policy. In practice, although some central banks have not explicitly proposed a two-pillar concept, their policy frameworks have essentially adopted the basic characteristics of the two-pillar framework: combining monetary policy and macroprudential policy. The People's Bank of China has persistently focused on the coordination of monetary policy and macroprudential policy. For example, when there are large-scale international twin surpluses, the liquidity of the banking system is raised above the appropriate level, and window guidance and other policy tools with macroprudential attributes are used to curb excessive growth in credit while promoting the stability of banks. In the transitional stage of the monetary policy framework, it is difficult to fully control credit expansion using only interest rates, as they are subject to various factors and there are many interest rate insensitive entities. In such cases, it is necessary to apply macroprudential policy measures. Generally, the effective coordination of monetary policy and macroprudential policy has enabled China to better cope with challenging internal and external situations and to create a moderate monetary and financial environment for economic restructuring and reform, while preventing systemic risk and promoting the sustainable development of the Chinese economy. In the next stage, the two-pillar macro-management framework can be strengthened by further improving the macroprudential policy framework and coordination mechanisms.
李斌, 吴恒宇. 对货币政策和宏观审慎政策双支柱调控框架内在逻辑的思考[J]. 金融研究, 2019, 474(12): 1-17.
LI Bin, WU Hengyu. On the Intrinsic Logic of the Two-Pillar Macro-management Framework of Monetary Policy and Macroprudential Policy. Journal of Financial Research, 2019, 474(12): 1-17.
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