The International Aspects of Macroprudential Policy

Kristin Forbes

No 15198, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Countries are using macroprudential tools more actively with the goal of improving the resilience of their broader financial systems. A growing body of evidence suggests that these tools can accomplish specific domestic goals and should reduce country vulnerability to many domestic and international shocks. The evidence also suggests, however, that these policies are not an elixir. They will not insulate economies from volatility and they generate leakages to the non-bank financial system and spillovers through international borrowing, lending and other cross-border exposures. Some of these unintended consequences can mitigate the effectiveness of macroprudential policies and generate new vulnerabilities and risks. The “Corona Crisis†provides a lens to evaluate the effectiveness of current macroprudential regulations during a period of extreme market volatility and economic stress. Experience to date suggests that macroprudential tools provide some benefits and should remain a focus of macroeconomic policy, but with realistic expectations about what they can accomplish.

Keywords: Macroprudential; Capital-flow measures; Bank regulation; Spillovers (search for similar items in EconPapers)
JEL-codes: E44 E5 F33 F36 F38 G21 G23 G28 (search for similar items in EconPapers)
Date: 2020-08
New Economics Papers: this item is included in nep-mac and nep-mon
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Citations: View citations in EconPapers (4)

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Journal Article: The International Aspects of Macroprudential Policy (2021)
Working Paper: The International Aspects of Macroprudential Policy (2020)
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