Macroprudential Policy Effects: Evidence and Open Questions
Departmental Papers, March 31, 2023
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Bibliographic details
- Authors: Nina Biljanovska, Sophia Chen, Deniz O Igan, Erlend Nier, Fabian Valencia
- Published: March 31, 2023
- Series: Departmental Papers
- DOI: https://doi.org/10.5089/9798400226304.087
Overview and Motivation
- The global financial crisis (GFC) underscored the need for additional policy tools to safeguard financial stability and macroeconomic stability.
- Systemic financial vulnerabilities developed under low inflation and small output gaps, challenging the precrisis view that traditional policy targets alone were sufficient.
- Macroprudential policy measures emerged to target specific financial vulnerabilities and build buffers to cushion adverse aggregate shocks, while allowing monetary and microprudential policies to focus on their traditional roles.
- Some macroprudential measures had been used before the GFC (mostly in emerging markets); after the crisis they were more widely adopted and the toolkit expanded.
- Growing empirical research examines the effects and potential shortfalls of these measures, with deeper knowledge needed as policymakers confront increased financial stability risks in the post-pandemic world.
Core Questions the Paper Addresses
- What have we learned about the effects of macroprudential policy in containing the buildup of vulnerabilities?
- What do we know about the effects on economic activity and resilience?
- How do policy effects vary with conditions and over time?
- How important are leakages and circumvention?
- How do the effects on credit depend on other policies?
Key Findings and Themes (as summarized)
- Macroprudential measures are designed to target specific financial vulnerabilities and to build buffers to cushion adverse aggregate shocks.
- The adoption and expansion of macroprudential toolkits after the GFC spurred a growing body of empirical research on their effects and side effects.
- There remains much to learn about heterogeneity of effects across countries, instruments, and time, and about interactions with other policies.
Subject Areas and Keywords
- Subject: Bank credit, Countercyclical capital buffers, Credit, Financial regulation and supervision, Financial sector policy and analysis, International organization, Macroprudential policy, Macroprudential policy instruments, Money, Political economy
- Keywords: Bank credit, Countercyclical capital buffers, Credit, Global, IMF Library, Macroprudential buffer, Macroprudential effect, Macroprudential policy, Macroprudential Policy database, macroprudential policy financial stability, Macroprudential policy instruments, policy effect
Departmental Papers: "Macroprudential Policy Effects: Evidence and Open Questions", Nina Biljanovska; Sophia Chen; Deniz O Igan; Erlend Nier; Fabian Valencia; March 31, 2023; Departmental Paper No 2023/002.
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- Macroprudential Policy Effects