[1] Menon (2014), “Getting in all the cracks or targeting the cracks? Securing financial stability in the  post-crisis era,” Speech at the 2014 Asian Monetary Policy Forum. [2] Stein (2013), “Overheating in credit markets: Origins, measurements, and policy responses”, Speech  at the 2013 “Restoring Household Financial Stability after the Great Recession: Why Household Balance Sheets Matter” Research Symposium. [3] Stein (2014), “Comments on market tantrums and monetary policy”, Speech at the 2014 US  Monetary Policy Forum, New York. [4] IMF (2020) “Toward an integrated policy framework’, and Borio, Shim, and Shin (2022), “Macro-  financial stability frameworks: experience and challenges”, BIS Working Papers No. 1057 [5] Ca’Zorzi, Dedola, Georgiadis, Jarocinski, Stracca and Strasser (2020), “Monetary policy and its  transmission in a globalised world”, Discussion paper No 2407 in the European Central Bank Working Paper Series. [6] Miranda-Agrippino and Rey (2020), “U.S. monetary policy and the global financial cycle”, The Review  of Economic Studies, Volume 87, Issue 6. [7] Borio, Shim, and Shin (2022), “Macro-financial stability frameworks: experience and challenges”, BIS  Working Papers No. 1057 [8] Adrian, Erceg, Kolasa, Lindé, and Zabczyk (2021), “A quantitative micro-founded model for the  integrated policy framework”, IMF Working Paper WP/21/292. [9] Cecchetti, Narita, Rawat, and Sahay (2021), “Addressing spillovers from prolonged US monetary  policy easing”, IMF Working Paper WP/21/182 [10] Fratzscher, Gloede, Menkhoff, Sarno and Stoehr (2018), “When is foreign exchange intervention  effective? Evidence from 33 countries”, American Economic Journal: Macroeconomics [11] IMF (2015) “Monetary policy and financial stability”.

Two, be more tolerant of inflation outcomes close to zero. Masaaki Shirakawa draws on Japan’s experience to suggest that the risks to economic activity associated with very low inflation did not warrant ultra loose monetary policy stances that undermine financial stability. [14] However, a more flexible approach to implementing inflation targeting can potentially be misinterpreted as reducing the commitment to price stability. It therefore needs to be accompanied by clear communication on the consistency between taking financial stability into account while pursuing price stability as the primary objective. FISCAL POLICY Fourth and final proposition: fiscal policy plays an important role in helping to secure both price stability and financial stability. The best contribution that fiscal policy can make to both price stability and financial stability is to ensure the sustainability of public debt. The role of fiscal policy in an integrated policy framework has not received as much attention as it probably deserves. Let me offer two reasons why it should. Sound public finances reduce the risk of fiscal dominance, enabling monetary policy to operate more freely to pursue its price stability mandate. Quantitative easing by major central banks through the purchase of massive amounts of government debt was a necessary response to the strong deflationary pressures unleashed by the Global Financial Crisis. But as government spending continued to grow long after the crisis and central banks continued to purchase government debt, the risk of fiscal dominance grew: the concern that normalising, let alone tightening, monetary policy would create fiscal problems.