Towards Effective Macroprudential Policy Frameworks: An Assessment of Stylized Institutional Models
IMF Working Papers, November 1, 2011
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Bibliographic details
- Authors: Erlend Nier, Luis Ignacio Jácome, Jacek Osinski, Pamela Madrid
- Published: November 1, 2011
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781463923327.001
Summary and purpose
- A number of countries are reviewing their institutional arrangements for financial stability to support the development of a macroprudential policy function.
- The paper provides basic guidance for the design of effective arrangements, in a manner that can provide a framework for country-specific advice.
- It addresses: rethinking institutional boundaries between central banks and financial regulatory agencies; setting up dedicated policymaking committees; and enhancing cooperation within existing institutional structures.
Methodology and structure
- Reviews briefly the main institutional elements of existing and emerging macroprudential policy frameworks across countries.
- Identifies stylized institutional models based on key features that distinguish institutional arrangements.
- Develops criteria to assess the effectiveness of models.
- Examines the strengths and weaknesses of models against these criteria.
- Explores ways to improve existing setups.
- Distills lessons and sets out desired principles for effective macroprudential policy arrangements.
Key findings and themes
- Institutional boundaries between central banks and financial regulatory agencies are being reconsidered in some countries to support macroprudential policy functions.
- Dedicated policymaking committees are being established in some jurisdictions as part of reform efforts.
- In other jurisdictions, the focus is on enhancing cooperation within existing institutional structures rather than creating new bodies.
- Effectiveness of institutional models depends on features assessed against the paper’s developed criteria (criteria are developed and applied within the paper).
Policy implications and recommendations
- Design arrangements that explicitly support a macroprudential policy function, informed by the paper’s criteria and assessment of stylized models.
- Consider reforms to institutional boundaries where central banks and regulatory agencies’ roles impede macroprudential effectiveness.
- Where institutional overhaul is not feasible, strengthen cooperation mechanisms within existing structures.
- Use the paper’s distilled lessons and desired principles to guide country-specific policy advice and institutional design.