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Implementing a Macroprudential Framework: Blending Boldness and Realism

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  • Borio Claudio

    (Bank for International Settlements)

Abstract

There is now a broad consensus in the policy community that strengthening the macroprudential orientation of regulatory and supervisory frameworks is essential for the promotion of financial stability. The window of opportunity to put in place fully fledged macroprudential frameworks should not be missed. Meeting this challenge calls for a finely balanced blend of boldness and realism. Boldness is required to face the hard design questions head-on; realism to avoid overreach and to manage expectations. Policymakers should be as ambitious as possible, but no more. In all this, research has an important role to play in allowing the framework to grow at a pace commensurate with our knowledge. This speech considers how to strike the balance between boldness and realism in several aspects of the framework: in the criterion for judging its success; in how closely systemic risk should be tracked; in the mix between an aggregate and a sectoral approach; in that between rules and discretion; and in governance arrangements. It also highlights some key questions for research.

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File URL: http://www.degruyter.com/view/j/cas.2011.6.1/cas.2011.6.1.1083/cas.2011.6.1.1083.xml?format=INT
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Bibliographic Info

Article provided by De Gruyter in its journal Capitalism and Society.

Volume (Year): 6 (2011)
Issue (Month): 1 (August)
Pages: 1-25

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Handle: RePEc:bpj:capsoc:v:6:y:2011:i:1:n:1

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References

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  1. Yener Altunbas & Leonardo Gambacorta & David Marques-Ibanez, 2010. "Does monetary policy affect bank risk-taking?," BIS Working Papers 298, Bank for International Settlements.
  2. Stefan Gerlach & Wensheng Peng, 2003. "Bank Lending and Property Prices in Hong Kong," Working Papers 122003, Hong Kong Institute for Monetary Research.
  3. Valerie Cerra & Sweta Chaman Saxena, 2008. "Growth Dynamics: The Myth of Economic Recovery," American Economic Review, American Economic Association, vol. 98(1), pages 439-57, March.
  4. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "This Time Is Different: Eight Centuries of Financial Folly," Economics Books, Princeton University Press, edition 1, volume 1, number 8973.
  5. Rodrigo Alfaro & Mathias Drehmann, 2009. "Macro stress tests and crises: what can we learn?," BIS Quarterly Review, Bank for International Settlements, December.
  6. Piet Clement, 2010. "The term “macroprudential”: origins and evolution," BIS Quarterly Review, Bank for International Settlements, March.
  7. Nikola Tarashev & Claudio Borio & Kostas Tsatsaronis, 2009. "The systemic importance of financial institutions," BIS Quarterly Review, Bank for International Settlements, September.
  8. Elsinger, Helmut & Lehar, Alfred & Summer, Martin, 2002. "Risk Assessment for Banking Systems," Working Papers 79, Oesterreichische Nationalbank (Austrian Central Bank).
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Cited by:
  1. Guillermo A. Calvo, 2012. "The Price Theory of Money, Prospero's Liquidity Trap, and Sudden Stop: Back to Basics and Back," NBER Working Papers 18285, National Bureau of Economic Research, Inc.
  2. Gersbach, Hans, 2013. "Bank capital and the optimal capital structure of an economy," European Economic Review, Elsevier, vol. 64(C), pages 241-255.

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