, whereas it has not ruled out the possibility of “ leaning against the wind ” in the face of excessive asset price developments. 5 • we should however acknowledge the enormous difficulties of defining what “ excessive ” means in this area and of designing a policy that aims at mitigating the risks of imbalances and crises in the financial sector while keeping it consistent with the preservation of price stability. we should probably also avoid asking too much to monetary policy ; certainly frameworks and rules in capital markets need to be revised and other policies ( regulatory, supervision … ) to be involved. in this respect, is the adoption of a fully fledged “ flexible inflation targeting ” – a framework from which both the fed and the ecb have differentiated themselves ( perhaps for different reasons ) – the right way to go? nowadays flexible inflation targeting is understood as a framework in which the central bank announces ( and specifies in quantitative terms ) its price stability goal and designs an optimal policy to reach it. but then, one may ask whether this may be too general a framework to provide an actual guidance to monetary policy. 6 furthermore : • is there a role for asset prices in flexible inflation targeting ( independently of their direct effects on inflation )? • in particular, may asset prices play a role in the anchoring of price expectations that is nowadays recognized by policymakers as a paramount condition for achieving price stability? anyway, the real issue to me does not lie much in the policy framework, but rather in the limitations of the models we use to interpret economic data and to decide our policy. this is particularly true for how we treat asset prices. let me just mention two points in this respect. • first, we probably do not know enough about the effects of asset price misalignments and related imbalances in equity, real estate and currency markets, as well as in bank credit and government debt. my reading of the empirical literature is that normally these effects are found to be relatively small and asset price see also, on this issue, the influential bis view as exemplified for instance in c. borio and p. lowe ( 2002 ), “ asset prices, financial and monetary stability : exploring the nexus ”, bis working papers no. 114. see for example o. issing ( 2004 ), “ financial integration, asset prices and monetary policy ”, speech at the symposium concluding two years of the ecb - cfs research network on “ capital markets and financial integration in europe ”. on this see also my discussion of

the same time. therefore, a sudden, sharp increase could s. g. hanson, a. k. kashyap, and j. c. stein ( 2011 ), “ a macroprudential approach to financial regulation ”, journal of economic perspectives, 25 ( 1 ) : 3 – 28 and angelini, nicoletti - altimari and visco ( 2013 ), op. cit.. e. nier, h. kang, t. mancini - griffoli, h. hesse, f. columba, r. tchaidze, and j. vandenbussche ( 2012 ), “ the interaction of monetary and macroprudential policies – background paper ”, imf policy paper. the analysis suggests that the effect on credit growth of changing the reserve requirement is stronger when loosening than when tightening. on the other hand, the effect on house prices of changing ltv ratios is stronger for tightening than for loosening. for the other macroprudential tools considered there is no significant difference. s. claessens, a. kose, m. terrones ( 2011 ), “ financial cycles : what? how? when? ”, imf working papers, 11 / 76. the policy move in the netherlands may be structural in nature, since ltvs exceeding 100 per cent are probably questionable apart from cyclical considerations. bis central bankers ’ speeches send many banks scrambling for funds at the same time, generating a system - wide dearth of capital. of course, this makes this tool potentially very powerful. 4. operational challenges in europe let me now turn to two practical aspects in the implementation of macroprudential tools on which significant progress is required, with a focus on europe. 4. 1 gaps in the statistical framework one not very glamorous but key issue is the question whether statistical reporting is adequate to help ensure policy implementation and instrument effectiveness. consider the housing market. housing market cycles differ substantially across countries ( figure 2 ), suggesting that map policies aimed at curbing problems of overheating in the realestate sector should be tailored to the national situation. the regulation being finalized in the eu ( crd - iv / crr ) properly allows for national leeway. in line with this evidence, a recent survey among euro - area ncbs, conducted by the bank of italy and presented in our latest financial stability report, shows that there is substantial dispersion of average lt