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Towards Effective Macroprudential Policy Frameworks

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Author Info

  • Erlend Nier
  • Luis Ignacio Jácome
  • Jacek Osinski
  • Pamela Madrid

Abstract

A number of countries are reviewing their institutional arrangements for financial stability to support the development of a macroprudential policy function. In some cases, this involves a rethink of the appropriate institutional boundaries between central banks and financial regulatory agencies, or the setting up of dedicated policymaking committees. In others, efforts are underway to enhance cooperation within the existing institutional structure. Against this background, this paper provides basic guidance for the design of effective arrangements, in a manner that can provide a framework for country-specific advice. After reviewing briefly the main institutional elements of existing and emerging macroprudential policy frameworks across countries, the paper identifies stylized institutional models based on key features that distinguish institutional arrangements. It develops criteria to assess the effectiveness of models, examines the strengths and weaknesses of models against these criteria, and explores ways to improve existing setups. The paper finally distills lessons and sets out desired principles for effective macroprudential policy arrangements.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 11/250.

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Length: 51
Date of creation: 01 Nov 2011
Date of revision:
Handle: RePEc:imf:imfwpa:11/250

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Keywords: Macroprudential Policy; Governance; Economic models; central bank; monetary policy; central banks; monetary fund; current account; inflation; current account deficits; monetary policy regime; reserve requirements; debt overhang; monetary independence; monetary decision; aggregate demand; monetary policy framework; national bank; current account surplus; monetary policy independence; cost of credit; money market; monetary stance; monetary policy autonomy; monetary authorities;

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References

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  1. Deniz Igan & Thierry Tressel & Prachi Mishra, 2009. "A Fistful of Dollars," IMF Working Papers 09/287, International Monetary Fund.
  2. International Monetary Fund, 2011. "Macroprudential Policy," IMF Working Papers 11/238, International Monetary Fund.
  3. Robert J. Barro & David B. Gordon, 1981. "A Positive Theory of Monetary Policy in a Natural-Rate Model," NBER Working Papers 0807, National Bureau of Economic Research, Inc.
  4. Honohan, Patrick & Donovan, Donal & Gorecki, Paul & Mottiar, Rafique, 2010. "The Irish Banking Crisis: Regulatory and Financial Stability Policy," MPRA Paper 24896, University Library of Munich, Germany.
  5. Giovanni Dell'Ariccia & Pau Rabanal & Christopher W. Crowe & Deniz Igan, 2011. "Policies for Macrofinancial Stability," IMF Staff Discussion Notes 11/02, International Monetary Fund.
  6. Luc Laeven & Fabian Valencia, 2010. "Resolution of Banking Crises," IMF Working Papers 10/146, International Monetary Fund.
  7. Goodhart, Charles & Schoenmaker, Dirk, 1995. "Should the Functions of Monetary Policy and Banking Supervision Be Separated?," Oxford Economic Papers, Oxford University Press, vol. 47(4), pages 539-60, October.
  8. Stijn Claessens & Luc Laeven & Deniz Igan & Giovanni Dell'Ariccia, 2010. "Lessons and Policy Implications From the Global Financial Crisis," IMF Working Papers 10/44, International Monetary Fund.
  9. Erlend Nier, 2009. "Financial Stability Frameworks and the Role of Central Banks," IMF Working Papers 09/70, International Monetary Fund.
  10. Ouarda Merrouche & Erlend Nier, 2010. "What Caused the Global Financial Crisis," IMF Working Papers 10/265, International Monetary Fund.
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Citations

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Cited by:
  1. Jacome H., Luis I. & Saadi Sedik, Tahsin & Townsend, Simon, 2012. "Can emerging market central banks bail out banks? A cautionary tale from Latin America," Emerging Markets Review, Elsevier, Elsevier, vol. 13(4), pages 424-448.
  2. Itai Agur & Sunil Sharma, 2013. "Rules, Discretion, and Macro-Prudential Policy," IMF Working Papers 13/65, International Monetary Fund.
  3. Mike Mariathasan & Ouarda Merrouche, 2012. "Recapitalization, credit and liquidity," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 27(72), pages 603-646, October.
  4. Edgardo Demaestri & Gustavo Ferro, 2013. "Analysis of the Integration of Financial Regulation and Supervision to the Central Bank," Ensayos Económicos, Central Bank of Argentina, Economic Research Department, Central Bank of Argentina, Economic Research Department, vol. 1(68), pages 75-106, June.
  5. Dalla Pellegrina, L. & Masciandaro, D. & Pansini, R.V., 2013. "The central banker as prudential supervisor: Does independence matter?," Journal of Financial Stability, Elsevier, Elsevier, vol. 9(3), pages 415-427.

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