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The Role of Macroprudential Indicators in Monitoring Systemic Risk and Setting Policy

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  • Ryan, Ellen

    (Central Bank of Ireland)

Abstract

The financial crisis demonstrated the damaging effects that the build-up of systemic risk in the financial system can have. However, due to the complex and constantly evolving nature of the modern financial system, monitoring systemic risk is not a straightforward task. As part of its systemic risk monitoring framework, the Central Bank maintains over 80 macroprudential indicators which reflect the multifaceted nature of systemic risk. The effectiveness of these indicators can be further enhanced by establishing indicator values associated with elevated risk levels and through the use of visualisation methods, such as heatmaps. While these indicators are used throughout the policy making process, they are not mechanically tied to policy decisions and policy maker judgement also plays a central role. This paper discusses the Central Bank’s approach to the use of macroprudential indicators in policy setting and provides an overview of a number of key indicators.

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  • Ryan, Ellen, 2017. "The Role of Macroprudential Indicators in Monitoring Systemic Risk and Setting Policy," Quarterly Bulletin Articles, Central Bank of Ireland, pages 62-80, April.
    • Handle: RePEc:cbi:qtbart:y:2017:m:04:p:62-80
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    1. Fasianos, Apostolos & Lydon, Reamonn & McIndoe-Calder, Tara, 2017. "The Balancing Act: Household Indebtedness Over the Lifecycle," Quarterly Bulletin Articles, Central Bank of Ireland, pages 46-61, April.
    2. Downey, Claire & Lyons, Paul & O'Malley, Terry, 2017. "Monitoring Ireland’s Payments using TARGET2," Quarterly Bulletin Articles, Central Bank of Ireland, pages 81-95, April.

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