## Rules, Discretion, and Macro-Prudential Policy

_IMF Working Papers, March 8, 2013_

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## Bibliographic details
- Authors: Itai Agur, Sunil Sharma
- Published: March 8, 2013
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475546699.001

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### Authors and Publication
- By Itai Agur, Sunil Sharma
- March 8, 2013
- IMF Working Papers, Series: Working Paper No. 2013/065
- Issue: 065
- Volume: 2013
- Pages: 32
- DOI: https://doi.org/10.5089/9781475546699.001
- ISBN: 9781475546699
- ISSN: 1018-5941
- Stock No: WPIEA2013065

### Core findings on implementation challenges
- Macro-prudential frameworks require coordination, flow of information, analysis, and communication, which create weaknesses that make implementation difficult.
- Dealing with the political economy of macro-prudential policy is likely to be challenging.
- Limiting discretion by formulating macro-prudential rules is complicated by difficulties in detecting and measuring systemic risk.
- Oversight is best served by having a strong baseline regulatory regime on which a time-varying macro-prudential policy can be added as conditions warrant and permit.

### Subject areas and keywords
- Subject: Asset and liability management; Banking; Commercial banks; Financial crises; Financial institutions; Financial sector policy and analysis; Liquidity; Systemic risk; Systemic risk assessment
- Keywords: bank; bank regulator; central bank; central bank leadership; Commercial banks; financial stability; Global; input consist; liquid asset; Liquidity; Macro-prudential policy; market; market liquidity; markets regulator; regulation; regulator; repo market; systemic risk; Systemic risk assessment; WP

### Policy implications and recommendations
- Maintain a strong baseline regulatory regime as the foundation for oversight.
- Implement time-varying macro-prudential measures layered on the baseline regime when conditions warrant and permit.
- Recognize and plan for institutional and informational weaknesses inherent in macro-prudential frameworks.
- Account explicitly for political economy constraints when designing macro-prudential frameworks.
- Exercise caution in relying exclusively on rule-based limits to discretion given challenges in detecting and measuring systemic risk.

*Source: IMF Working Paper "Rules, Discretion, and Macro-Prudential Policy" by Itai Agur and Sunil Sharma, March 8, 2013.*

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/rules-discretion-and-macro-prudential-policy-40379_