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Macroprudential Policy: What Instruments and How to Use Them? Lessons from Country Experiences

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  • International Monetary Fund

Abstract

This paper provides the most comprehensive empirical study of the effectiveness of macroprudential instruments to date. Using data from 49 countries, the paper evaluates the effectiveness of macroprudential instruments in reducing systemic risk over time and across institutions and markets. The analysis suggests that many of the most frequently used instruments are effective in reducing pro-cyclicality and the effectiveness is sensitive to the type of shock facing the financial sector. Based on these findings, the paper identifies conditions under which macroprudential policy is most likely to be effective, as well as conditions under which it may have little impact.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 11/238.

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Length: 30
Date of creation: 01 Oct 2011
Date of revision:
Handle: RePEc:imf:imfwpa:11/238

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Postal: International Monetary Fund, Washington, DC USA
Phone: (202) 623-7000
Fax: (202) 623-4661
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Web page: http://www.imf.org/external/pubind.htm
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Related research

Keywords: Credit; Liquidity; Capital; Banks; Capital inflows; Credit risk; Developed countries; Emerging markets; Exchange rate regimes; Financial risk; Financial sector;

This paper has been announced in the following NEP Reports:

References

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  1. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
  2. Dell''Ariccia, Giovanni & Marquez, Robert, 2005. "Lending Booms and Lending Standards," CEPR Discussion Papers 5095, C.E.P.R. Discussion Papers.
  3. Heitor Almeida & Murillo Campello & Crocker Liu, 2006. "The Financial Accelerator: Evidence from International Housing Markets," Review of Finance, European Finance Association, vol. 10(3), pages 321-352, September.
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Citations

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Cited by:
  1. Mynor Meza & Fernando L Delgado, 2011. "Developments in Financial Supervision and the Use of Macroprudential Measures in Central America," IMF Working Papers 11/299, International Monetary Fund.
  2. Francesco Spadafora & Emidio Cocozza & Andrea Colabella, 2011. "The Impact of the Global Crisis on South-Eastern Europe," IMF Working Papers 11/300, International Monetary Fund.
  3. International Monetary Fund, 2012. "Credit Growth and the Effectiveness of Reserve Requirements and Other Macroprudential Instruments in Latin America," IMF Working Papers 12/142, International Monetary Fund.
  4. Patrick A. Imam & Erlend Nier & Luis Ignacio Jácome, 2012. "Building Blocks for Effective Macroprudential Policies in Latin America: Institutional Considerations," IMF Working Papers 12/183, International Monetary Fund.
  5. Nicolas E. Magud & Carmen M. Reinhart & Esteban R. Vesperoni, 2011. "Capital Inflows, Exchange Rate Flexibility, and Credit Booms," NBER Working Papers 17670, National Bureau of Economic Research, Inc.
  6. Cihak, Martin & Demirguc-Kunt, Asli & Johnston, R. Barry, 2013. "Incentive audits : a new approach to financial regulation," Policy Research Working Paper Series 6308, The World Bank.
  7. Antje Hildebrandt & Katharina Steiner & Karin Wagner & Reiner Martin, 2012. "Residential Property Markets in CESEE EU Member States," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 8-30, February.
  8. Paolo Angelini & Sergio Nicoletti-Altimari & Ignazio Visco, 2012. "Macroprudential, microprudential and monetary policies: conflicts, complementarities and trade-offs," Questioni di Economia e Finanza (Occasional Papers) 140, Bank of Italy, Economic Research and International Relations Area.
  9. Tovar, Camilo & Garcia-Escribano, Mercedes & Vera, Mercedes, 2012. "El crecimiento del crédito y la efectividad de los requerimientos de encaje y otros instrumentos macroprudenciales en América Latina," Revista Estudios Económicos, Banco Central de Reserva del Perú, issue 24, pages 45-64.
  10. Erlend Nier & Luis Ignacio Jácome & Jacek Osinski & Pamela Madrid, 2011. "Towards Effective Macroprudential Policy Frameworks: An Assessment of Stylized Institutional Models," IMF Working Papers 11/250, International Monetary Fund.

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