Macroprudential Policy Instruments of Central Banks

2012 ◽  
pp. 32-47
Author(s):  
S. Andryushin ◽  
V. Kuznetsova
Keyword(s):  
Systemic Risk ◽  
Financial Stability ◽  
Financial System ◽  
Policy Instruments ◽  
Central Banks ◽  
Macroprudential Policy ◽  
Policy Studies ◽  
The Future ◽  
Financial Cycles

The paper analyzes central banks macroprudencial policy and its instruments. The issues of their classification, option, design and adjustment are connected with financial stability of overall financial system and its specific institutions. The macroprudencial instruments effectiveness is evaluated from the two points: how they mitigate temporal and intersectoral systemic risk development (market, credit, and operational). The future macroprudentional policy studies directions are noted to identify the instruments, which can be used to limit the financial systemdevelopment procyclicality, mitigate the credit and financial cycles volatility.

scholarly journals Macroprudential Policy Versus Other Economic Policies

2021 ◽  
Vol 23 (2) ◽  
pp. 33-66
Author(s):  
Eva Lorenčič ◽  
◽  
Mejra Festić ◽  
Keyword(s):  
Financial Crises ◽  
Financial Stability ◽  
Global Financial Crisis ◽  
Financial System ◽  
Policy Instruments ◽  
Economic Policies ◽  
Macroprudential Policy ◽  
Descriptive Research ◽  
The Stability ◽  
The Global Financial Crisis

After the global financial crisis of 2007, macroprudential policy instruments have gained in recognition as a crucial tool for enhancing financial stability. Monetary policy, fiscal policy, and microprudential policy operate with a different toolkit and focus on achieving goals other than the stability of the financial system as a whole. In ligh of this, a fourth policy – namely macroprudential policy – is required to mitigate and prevent shocks that could destabilize the financial system as a whole and compromise financial stability. The aim of this paper is to contrast macroprudential policy with other economic policies and explain why other economic policies are unable to attain financial stability, which in turn justifies the need for a separate macroprudential policy, the ultimate goal whereof is precisely financial stability of the financial system as a whole. Our research results based on the descriptive research method indicate that, in order to prevent future financial crises, it is indispensable to combine both the microprudential and the macroprudential approach to financial stability. This is because the causes of the crises are often such that they cannot be prevented or mitigated by relying only on microprudential or only on macroprudential policy instruments.

Balancing Financial Stability and Housing Affordability

2018 ◽  
Vol 2018 (237) ◽  
Author(s):  
Troy Matheson
Keyword(s):  
Housing Market ◽  
Systemic Risk ◽  
Financial Stability ◽  
Property Tax ◽  
Policy Instruments ◽  
Policy Instrument ◽  
Housing Affordability ◽  
Tax Rates ◽  
Macroprudential Policy ◽  
Property Transfer

Housing market imbalances are a key source of systemic risk and can adversely affect housing affordability. This paper utilizes a stylized model of the Canadian economy that includes policymakers with differing objectives—macroeconomic stability, financial stability, and housing affordability. Not surprisingly, when faced with multiple objectives, deploying more policy instruments can lead to better outcomes. The results show that macroprudential policy can be more effective than policies based on adjusting propertytransfer taxes because property-tax policy entails excessive volatility in tax rates. They also show that if property-transfer taxes are used as a policy instrument, taxes targeted at a broader-set of homebuyers can be more effective than measures targeted at a smaller subset of homebuyers, such as nonresident homebuyers.

scholarly journals Macroprudential policy and financial stability, role and tools

2020 ◽  
Vol 4 (4) ◽  
pp. 45-54
Author(s):  
Mehdi Bouchetara ◽  
Abdelkader Nassour ◽  
Sidi Eyih
Keyword(s):  
Financial Crisis ◽  
Financial Stability ◽  
Full Employment ◽  
Financial System ◽  
Policy Instruments ◽  
Banking Crises ◽  
Real Economy ◽  
Macroprudential Policy ◽  
Systemic Risks ◽  
The Impact

The aim of macroprudential policy is to ensure financial stability by avoiding the outbreak of banking crises, which have a dangerous effect on the economy. Is macroprudential policy effective in the face of banking crises and systemic risks? The macroprudential policy has received significant interest from policy-makers and researchers. A few developing countries were using macroprudential policy tools well before the 2008 financial crisis, but significant progress has been made thereafter in both emerging and industrialized economies to put in place specific institutional settings for macroprudential policy. The fundamental objective of macroprudential policy is to maintain the stability of the financial system by making it more resistant and preventing the risk build-up. The objective of this paper is to analyze the important role of macroprudential policy in ensuring overall financial stability. Since the financial crisis of 2008, macroprudential policy has been increasingly used across economies. These measures aim at smoothing financial cycles and thereby mitigating the impact on the real economy, thereby allowing monetary policy to focus on price stability and promote growth and full employment. Macroprudential policy instruments fall into two categories, depending on their purpose, namely, to prevent procyclicality or to enhance the resilience and soundness of the financial system against shocks. The first category of instruments is used to stop bubbles from forming and smooth cycles, i.e. to force the debt-equity of economic operators on an income basis to prevent unsustainable credit bubbles, or to require dynamic loss provisioning rules. The second category of macro-prudential policy is to improve the resilience to shocks, such as capital surcharges for systemic institutions or the requirement to hold liquid assets to cope with market panics, and to make the financial system less complex. Keywords: macroprudential policy, financial stability, tools and measures, systemic risks.

scholarly journals Fiinancial Stability and Reform of the Financial System

2012 ◽  
Vol 2 (2) ◽  
pp. 58-69
Author(s):  
Juraj Sipko
Keyword(s):  
Financial Crisis ◽  
Systemic Risk ◽  
Financial Stability ◽  
Global Financial Crisis ◽  
Financial System ◽  
Financial Sector ◽  
Regulatory Reform ◽  
Economic Costs ◽  
Literature Study ◽  
Macroprudential Policy

Abstract The paper describes the main features of financial stability and the preparation of the reform of the global financial system. The mortgage crisis in the USA brought about the global financial crisis. This crisis was the result of the failure of financial regulation, including supervision, and the failure of the management of the banking industry. Therefore, the international community, including Group 20, urged the appropriate institutions to introduce a comprehensive reform of the financial sector. To avoid a potential financial crisis, the creation of the framework for financial stability would be needed. In line with this, the paper examines the interaction between both monetary and fiscal policies, including micro-and macroprudential policies and their instruments. Although still is going on discussion on definition of macroprudential policy, there is a generally accepted opinion that macroprudential policy should limit systemic risk. In addition, this policy should focus on interaction between the financial system and the real economy. Furthermore, micro- andmacroprudential policy should use appropriate instruments in dealing with the systemic risk. In this regard, the article undescores that put in a place the frameworkfor financial stability will create favorable conditions for decision-makers how they should to respond to financial imbalances. The paper also pointed out some potential economic costs related to the implementation of the overall international reform of the financial sector. Based on comprehensive literature study, the author came to the conclusion that despite the fact that there will be some economic costs related to implementing the overall regulatory reform of the financial sector, the main benefit from the long-term perspective will be avoiding the potential financial crisis in the future. To fulfill all the requirements for global financial reform, international cooperation will be needed.

scholarly journals MANAKAH INDIKATOR TERPENTING STABILITAS SISTEM KEUANGAN?: PERSPEKTIF MAKROPRUDENSIAL

2019 ◽  
Vol 27 (1) ◽  
pp. 25-42
Author(s):  
Aam Slamet Rusydiana ◽  
Lina Nugraha Rani ◽  
Fatin Fadilah Hasib
Keyword(s):  
Financial Stability ◽  
Inflation Rate ◽  
Financial System ◽  
Analytic Network Process ◽  
System Stability ◽  
Contagion Effect ◽  
Macroprudential Policy ◽  
Important Indicator ◽  
Network Process ◽  
Stability Measurement

In general there are two indicators of financial system stability, namely microprudential and macroprudential. Among macroprudential indicators are economic growth, balance of payments, inflation rate, interest and exchange rates, crisis contagion effect, and many others. Different from the previous researches concerning financial system stability measurement, this research will use the financial and banking practitioners’ perspective regarding the leading indicator in measuring financial system stability thus we can presumably determine the real leading financial stability indicator for the current situation using Analytic Network Process (ANP) method.The results show that based on the results of interviews with experts/banking practitioners, the 3 (three) most important aspects are the Debt aspect (0.225), Macro Indicator (0.222) and the Balance of Payment aspect (0.217). An important indicator of financial system stability from the next macroprudential aspect is related to Contagion Effect (0.178) and the last Aspect Labor (0.159). The Macroprudential Policy issued by Bank Indonesia as the central bank that has full authority, play an important role in maintaining Financial System Stability (SSK) in Indonesia.

scholarly journals Macroprudential policy debate, concepts and the Brazilian context

2018 ◽  
Vol 4 (1) ◽  
pp. 35
Author(s):  
Míriam Oliveira Silva Portugues ◽  
Viviane Luporini ◽  
Luis Antonio Licha
Keyword(s):  
Financial Stability ◽  
Banking System ◽  
Financial System ◽  
International Standards ◽  
Capital Inflows ◽  
Shadow Banking ◽  
Policy Debate ◽  
Macroprudential Policy ◽  
Intrinsic Nature ◽  
Economics Literature

<div class="page" title="Page 1"><div class="layoutArea"><div class="column"><p><span>The economics literature related to the financial system seeks to define the concepts of financial stability, systemic risk and macroprudential instruments for the purpose of drafting a policy that essentially "leans against the wind", that is, a policy that monitors macroeconomic vulnerabilities and combats system instability. Such a policy should cover all financial institutions involved in credit intermediation (not just banks) and consider the pro-cyclical and intrinsic nature of risk in the financial system, and account for the spillovers effects of policies in other countries, that is, the global context. This article summarizes the main concepts related to macroprudential policy discussed in the economics literature after the crisis the 2008 financial crisis. In addition, we describe macroprudential policy in the context of the Brazilian financial system, specifically major policies implemented in the banking regulatory environment related to Basel III and non-bank regulations related to shadow banks. After the 2008 crisis, Brazil was one of the precursors countries in operating macroprudential instruments to curb excessive credit growth and strong capital inflows. The Brazilian financial system has a broad regulatory perimeter, adhering to international standards and covering the Shadow banking system. This system has a weak connection with the banking system and is small relative to the financial assets of the national and global systems. </span></p></div></div></div>

scholarly journals Financial Stability Indicators – The Case of Croatia

2016 ◽  
Vol 5 (1) ◽  
pp. 113-140 ◽  
Author(s):  
Mirna Dumičić
Keyword(s):  
Principal Component Analysis ◽  
Systemic Risk ◽  
Financial Stability ◽  
Principal Component ◽  
Small Open Economies ◽  
Macroprudential Policy ◽  
Policy Makers ◽  
The Public ◽  
Systemic Risks ◽  
Accumulation Index

Abstract This paper considers financial stability through the processes of accumulation and materialisation of systemic risks. To this end, the method of principal component analysis on the example of Croatia has been used to construct two composite indicators – a systemic risk accumulation index and an index reflecting the consequences of systemic risk materialisation. In the construction of the indices, the features and risks specific to small open economies were considered. Such an approach to systemic risk analysis facilitates the monitoring and understanding of the degree of financial stability and communication of macroprudential policy makers with the public.

Provisional Agenda for the Twenty-First Meeting of the International Monetary and Financial Committee

Policy Papers ◽  
2010 ◽  
Vol 2010 (43) ◽  
Author(s):  
Keyword(s):  
Financial Stability ◽  
Financial System ◽  
Central Banks ◽  
Policy Frameworks

The crisis brought the financial system to the verge of systemic collapse and raised the prospect of depression and deflation. Central banks helped defuse these threats, including through exceptional measures. Considerable efforts are now under way to draw policy lessons from the crisis. For central banks, the crisis seems to provide three important lessons for policy frameworks—mainly concerning systemic financial stability.

scholarly journals Importance of Macroprudential Policy Implementation for Safeguarding Financial Stability

2016 ◽  
Vol 5 (3) ◽  
pp. 79-98 ◽  
Author(s):  
Milena Vučinić
Keyword(s):  
Policy Implementation ◽  
Financial Stability ◽  
Financial System ◽  
Precise Determination ◽  
Institutional Framework ◽  
System Stability ◽  
Economic Policies ◽  
Macroprudential Policy ◽  
Systemic Risks ◽  
Potential Risks

Abstract The crisis pointed to the necessity for strong and stable financial system resistant to potential risks and shocks. Macroprudential policy is used to identify, monitor and asses systemic risks to financial stability. Therefore, it is very important to create effective and efficient macroprudential policy. To achieve this, it is crucial to create a strong institutional framework. This paper deals with the importance of macroprudential policy for financial system stability. The first part of the paper explains the macroprudential policy and its connection with other economic policies. The second part refers to the necessity of building strong institutional framework and the importance of providing clear responsibilities for macroprudential policy, as long as precise determination of responsibilities is very suggested and important for further functioning and policy implementation. Responsibilities for macro-prudential policy and macroprudential supervision defers among countries.

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