Can macro-prudential policies prevent bubbles?

If policy-makers hope that macro-prudential measures alone will prevent asset price bubbles from occurring, they may well be disappointed. In principle, these regulations should be able to dampen credit growth while sustaining a broader economic recovery. But there are substantial obstacles to their implementation and they may not be as effective as many hope. Moreover, the presence of a macro-prudential regulator may encourage other policy-makers to leave interest rates too low for too long. For that reason, these policies could even end up being counter-productive.