FT.com / Comment / Opinion - Let central banks direct the supply of credit
Interesting policy suggestion that I am not sure will be so easy to implement. The question is how do you set capital ratio levels to counteract foreign capitals inflows? What formula do you use?
if too much capital is set aside, it will go to buy government bonds, thereby pressuring down interest rates against central banks goals,...
The real pb in my view was the inability to control long term rates.
Again, a BICs framework on interest rate is to me the most efficient mechanism of controlling long term rates, thereby controlling mortgage demand/supply
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