Making macroprudential regulation operational

Anil K Kashyap , Dimitri Tsomocos, Alexandros Vardoulakis, 18 July 2014

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The IMF staff (Benes et al. 2014) recently unveiled a new model that “has been developed at the IMF to support macrofinancial and macroprudential policy analysis”. In introducing the model they argue that “such new analytical frameworks require a major revamp of the conventional linear dynamic stochastic general equilibrium (DSGE) models”. We agree with Benes et al.

Topics: Macroeconomic policy
Tags: banks, Macroprudential policy, model building, savers

It’s time to deploy macroprudential policy: results from the Centre for Macroeconomics July Survey

Angus Armstrong, Francesco Caselli, Jagjit Chadha, Wouter den Haan, 8 July 2014

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The Centre for Macroeconomics (CFM) – an ESRC-funded research centre including the University of Cambridge, the London School of Economics (LSE), University College London (UCL) and the National Institute of Economic and Social Research (NIESR) – is today publishing the results of its fourth monthly survey.1 The surveys are designed to inform the public

Topics: Macroeconomic policy
Tags: housing market, Macroprudential policy, UK

Model risk and the implications for risk management, macroprudential policy, and financial regulations

Jon Danielsson, Kevin James, Marcela Valenzuela, Ilknur Zer, 8 June 2014

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Risk forecasting is central to macroprudential policy, financial regulations, and the operations of financial institutions. Therefore, the accuracy of risk forecast models – model risk analysis – should be a key concern for the users of such models. Surprisingly, this does not appear to be the case.

Topics: Financial markets
Tags: financial crises, financial regulation, forecasting, Macroprudential policy, risk management

Capital controls in the 21st century

Barry Eichengreen, Andrew K Rose, 5 June 2014

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Capital controls are back. The IMF (2012) has softened its earlier opposition to their use. Some emerging markets – Brazil, for example – have made renewed use of controls since the global financial crisis of 2008–2009.

Topics: International finance
Tags: capital, capital controls, capital flows, global financial crisis, IMF, Macroprudential policy

Estimating the impact of changes in aggregate bank capital requirements during an upswing

Joseph Noss, Priscilla Toffano, 6 April 2014

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The recent financial crisis and economic contraction that followed highlighted the crucial role that banks play in facilitating the extension of credit and enabling economic growth. This underlies the economic rationale for imposing regulations on the banking industry, including minimum capital requirements designed to mitigate risks banks would not otherwise account for in their behaviour.

Topics: Financial markets
Tags: bank capital, bank regulation, banking, banks, BASEL III, capital requirements, credit, Macroprudential policy, regulations

How much is enough? The case of the Resolution Fund in Europe

Thomas Huertas, María J Nieto, 18 March 2014

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During the crisis, individual institutions such as Hypo Real Estate required public assistance of €100 billion or more.1 So how can a European Resolution Fund of only €55 billion possibly suffice for all banks in the Eurozone?

Topics: EU institutions, Financial markets, International finance
Tags: bail-in, bank resolution, banking, European Resolution Fund, eurozone, Macroprudential policy, microprudential regulation, regulation, systemic risk

The interaction between monetary and macroprudential policies

Stijn Claessens, Fabian Valencia, 14 March 2013

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In the decades prior to the crisis, macroeconomic management evolved to assign a strong role to monetary policy, with a primary focus on price stability. The framework of monetary policy was broadly converging toward one with an inflation target (explicit or implicit) and a short-term interest rate as a tool (Blanchard, Dell’Ariccia and Mauro 2010).

Topics: Global governance, Monetary policy
Tags: Macroprudential policy

Macroprudential supervision in banking union

Dirk Schoenmaker, 9 December 2012

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There is a strong tendency to focus on the stability and soundness of individual banks. Supervisors may thus be bogged down by the details of these banks, while losing sight of emerging imbalances in the wider financial system.

Topics: EU institutions, EU policies, Europe's nations and regions
Tags: banking union, Eurozone crisis, Macroprudential policy

Macroprudential policy: Economic rationale and optimal tools

Giovanni Favara, Lev Ratnovski, 6 August 2012

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The purpose of macroprudential policy is to reduce ‘systemic risk’. While hard to define formally, systemic risk is understood as 'the risk of developments that threaten the stability of the financial system as a whole and consequently the broader economy” (Bernanke, 2009). The notion is meant to include the types of financial imbalances that led to the 2007-2008 bust.

Topics: Financial markets
Tags: Macroprudential policy, macroprudential regulation, systemic risk

Macroprudential policy: What instruments and how to use them? Lessons from country experiences

Francesco Columba, Alejo Costa, Cheng Hoon Lim, 16 March 2012

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Macroprudential policy is quickly gaining traction in international circles as a useful tool to address system-wide risks in the financial sector (see for example Borio 2011, Galati and Moessner 2011, Viñals 2010, 2011). Yet the analytical and operational underpinnings of a macroprudential framework are not fully understood and the effectiveness of the instruments is uncertain.

Topics: Financial markets
Tags: banks, Macroprudential policy, systemic risk

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