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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: 85
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
Email:
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. Dell''Ariccia, Giovanni & Marquez, Robert, 2005. "Lending Booms and Lending Standards," CEPR Discussion Papers 5095, C.E.P.R. Discussion Papers.
  2. 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.
  3. M Arellano & O Bover, 1990. "Another Look at the Instrumental Variable Estimation of Error-Components Models," CEP Discussion Papers dp0007, Centre for Economic Performance, LSE.
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Citations

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Cited by:
  1. 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.
  2. 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.
  3. 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.
  4. Cheng Hoon Lim & Ivo Krznar & Fabian Lipinsky & Akira Otani & Xiaoyong Wu, 2013. "The Macroprudential Framework: Policy Responsiveness and Institutional Arrangements," IMF Working Papers 13/166, International Monetary Fund.
  5. 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.
  6. 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.
  7. 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.
  8. Nicolas E. Magud & Esteban Vesperoni & Carmen Reinhart, 2012. "Capital Inflows, Exchange Rate Flexibility, and Credit Booms," IMF Working Papers 12/41, International Monetary Fund.
  9. Steiner, Katharina & Wagner, Karin & Hildebrandt, Antje & Martin, Reiner, 2012. "Residential Property Markets in CESEE EU Member States," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 1.
  10. 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.
  11. Jerome Vandenbussche & Ursula Vogel & Enrica Detragiache, 2012. "Macroprudential Policies and Housing Prices—A New Database and Empirical Evidence for Central, Eastern, and Southeastern Europe," IMF Working Papers 12/303, International Monetary Fund.
  12. 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.
  13. Canuto, Otaviano & Cavallari, Matheus, 2013. "Asset Prices, Macroprudential Regulation, and Monetary Policy," World Bank - Economic Premise, The World Bank, issue 116, pages 1-8, May.
  14. Otaviano Canuto & Matheus Cavallari, 2013. "Asset Prices, Macro Prudential Regulation, and Monetary Policy," World Bank Other Operational Studies 16116, The World Bank.
  15. Claessens, Stijn & Ghosh, Swati R. & Mihet, Roxana, 2013. "Macro-prudential policies to mitigate financial system vulnerabilities," Journal of International Money and Finance, Elsevier, vol. 39(C), pages 153-185.
  16. Kenneth N. Kuttner & Illyock Shim, 2013. "Can non-interest rate policies stabilize housing markets?," Department of Economics Working Papers 2013-20, Department of Economics, Williams College, revised Dec 2013.

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