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Danthine urges central banks to adopt conservative housing policies

Jean-Pierre Danthine, Jean-Pierre Danthine, former Vice-President of the National Bank of Switzerland, considers that one of the main lessons of the economic crisis that shook the main international economies after the collapse of Lehman Brothers in 2008 and the collapse of the financial system in several countries, including Spain, goes through the adoption of very conservative policies in the housing market by central banks. In addition to macroprudential instruments or anti-cyclical capital mattresses that have already been implemented in various countries.
"We have learned a lot in recent years for monetary policy and we can say that the crisis will not have been useless. Now we know more than ever about the need for fiscal prudence in good times to ensure the ability to act in times of crisis. A reinterpretation of the financial stability component of the central bank mandate seems necessary. In addition to aggressively tackling the Too-Big-To-Fail problem, this involves a prosaic willingness to adopt very conservative policies in the housing market. Because this is the most frequent source of Financial instability of an economy", argues Danthine.
The former executive of the National Bank of Switzerland also warns about the risk that can cause the smaller financial entities. "A priori they may seem harmless to the stability of the system, but their decisions, by their procyclical nature and through their mutual interactions, can suddenly amplify the expansion or contraction of the financial markets and can undermine the stability of the system", he says.
Finally, Danthine defends the role of the central banks once the crisis explodes and finds that its role has been crucial for the recovery. "The reaction of the central banks to the onset of the crisis followed the flexible application model of the principles learned from the Great Depression and if there was not a new episode of similar devastating magnitude for the real economy can be attributed to their action".
Danthine made these reflections during her admission to the Real Academia de Ciencias Económicas y Financieras of Spain (RACEF) as Corresponding Academician for Switzerland in a ceremony held at the Palau Macaya of La Caixa Foundation in Barcelona. The recipient has read the speech "La politique monétaire à la lumière de la crisis". On behalf of the RACEF has been answered its Vice President,
Lorenzo Gascón.
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