How can macroprudential policy and monetary policy stabilize segmented credit markets? Is there a trade-off between financial stability and price stability? I use a theoretical model to evaluate the performance of alternative policies and find the optimal mix of macroprudential and monetary policy in response to aggregate shocks.
Countercyclical capital buffers are regulatory measures developed in response to the global financial crisis of 2008–09. This note focuses on how time-varying capital buffers can improve financial stability in Canada