## “Macro…, what?!” The New Buzz on Financial Stability

_IMF Blog, March 23, 2012_

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**Canonical URL:** [“Macro…, what?!” The New Buzz on Financial Stability](https://www.imf.org/en/blogs/articles/2012/03/23/macro-what-the-new-buzz-on-financial-stability)

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## Bibliographic details
- Authors: Jose-Vinals, Nicols Eyzaguirre
- Published: March 23, 2012

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### Overview
- Authors: José Viñals, Nicolás Eyzaguirre
- Date: March 23, 2012
- Theme: Emergence of macroprudential policy as a central element of the policy toolkit to preserve economic stability and sustain growth in the aftermath of the global financial crisis.
- Definition emphasized: Macroprudential policy seeks to contain systemic risks in the financial system.

### Examples of macroprudential instruments and uses
- Loan-to-value ratios
- Debt-to-income ratios
- Countercyclical loan loss provisions
- Purpose noted: To rein in rapid credit growth that—if unchecked—could destabilize the financial system, bring about a recession, and drive up unemployment.

### IMF role and analysis
- The IMF has assumed a leadership role in macroprudential policy analysis.
- Recent IMF analysis examines policy options for designing effective institutional frameworks and instruments.
- The IMF’s surveillance and technical assistance activities are highlighted as highly beneficial; close coordination between these areas is seen as critical.

### Designing effective macroprudential policies (conference insights)
- A high-level regional conference was co-hosted with the Central Bank of Uruguay to discuss how macroprudential policies can help achieve financial stability.
- Participants included central bank presidents, financial supervisors, and other senior policymakers from Latin America and some advanced economies.
- Conference topics: Proper institutional design for macroprudential policies and effective instruments.

Key points from participants:
- Financial stability is a responsibility shared by all policies.
- Strong macroeconomic policy frameworks, especially with flexible exchange regimes, are essential to prevent accumulation of financial imbalances that could lead to systemic risk.
- Effective microprudential policies, including effective supervision, are critical to prevent excessive risk taking by individual financial institutions.
- The full effects of macroprudential tools are still not well understood.
- Strong policy coordination is essential so that policies reinforce each other and do not work against each other.
- Financial stability committees have been established in many countries to ensure coordination and information sharing; these committees must be tailored to individual country circumstances.
- There was broad support for giving a key role to the central bank in such committees.

### Sharing experiences and next steps
- Conference participants noted the Fund is uniquely positioned to draw on the experiences of all its members and to lead research and analysis on macroprudential policies.
- The IMF will continue to help member countries design macroprudential policy frameworks.
- Emphasis on learning-by-doing: macroprudential policy design remains a work in progress and instruments should be specific enough and based on clear rules that allow for adjustments during the business cycle.
- Regional approaches (for example, in Latin America) are being assessed.

### Key takeaways
- Macroprudential policy has become an important part of the overall policy toolkit for financial stability.
- There is no “one size fits all” institutional design for macroprudential policy.
- Coordination across macroeconomic, microprudential, and macroprudential policies is critical.
- Careful implementation can make macroprudential policy a cornerstone of financial stability policy.

*Source: “Macro…, what?!” The New Buzz on Financial Stability — José Viñals, Nicolás Eyzaguirre; March 23, 2012.*

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## References

- [https://www.imf.org/wp-content/uploads/2012/03/vinalseyzaguirre2.jpg](https://www.imf.org/wp-content/uploads/2012/03/vinalseyzaguirre2.jpg)
- [José Viñals](http://blogs.imf.org/bloggers/jose-vinals/)
- [Nicolás Eyzaguirre](http://blogs.imf.org/bloggers/nicolas-eyzaguirre/)
- [macroprudential](http://www.imf.org/external/pubs/ft/fandd/2012/03/jacome.htm)
- [Macroprudential policy](http://blogs.imf.org/2011/04/08/macroprudential-policy-filling-the-black-hole/)
- [regional conference](http://www.imf.org/external/np/sec/pr/2012/pr1263.htm)
- [here](http://www.imf.org/external/np/seminars/eng/2012/macro/)
- [surveillance](http://www.imf.org/external/np/exr/facts/surv.htm)
- [technical assistance](http://www.imf.org/external/np/exr/facts/tech.htm)

_Source: https://www.imf.org/en/blogs/articles/2012/03/23/macro-what-the-new-buzz-on-financial-stability_