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Macroprudential Policy: Results from a Tabletop Exercise

Author

Listed:
  • Duffy, Denise

    (Federal Reserve Bank of Cleveland)

  • Haubrich, Joseph G.

    (Federal Reserve Bank of Cleveland)

  • Kovner, Anna

    (Federal Reserve Bank of New York)

  • Musatov, Alex

    (Federal Reserve Bank of Dallas)

  • Prescott, Edward Simpson

    (Federal Reserve Bank of Cleveland)

  • Rosen, Richard J.

    (Federal Reserve Bank of Chicago)

  • Tallarini, Thomas D.

    (Federal Reserve Bank of Minneapolis)

  • Vardoulakis, Alexandros

    (Federal Reserve Board)

  • Yang, Emily

    (Federal Reserve Bank of New York)

  • Zlate, Andrei

    (Federal Reserve Board)

Abstract

This paper presents a tabletop exercise designed to analyze macroprudential policy. Several senior Federal Reserve officials were presented with a hypothetical economy as of 2020:Q2 in which commercial real estate and nonfinancial debt valuations were very high. After analyzing the economy and discussing the use of monetary and macroprudential policy tools, participants were then presented with a hypothetical negative shock to commercial real estate valuations that occurred in the second half of 2020. Participants then discussed the use of the tools during an incipient downturn. Some of the findings of the exercise were that during an asset boom, there were limits to the effectiveness of US macroprudential tools in controlling narrow risks and that changes to the fed funds rate may not always simultaneously meet macroeconomic and financial stability goals. Some other findings were that during a downturn, it would be desirable to use high-frequency indicators for deciding when to release the countercyclical capital buffer (CCyB) and that tensions exist between microprudential and macroprudential goals when using the CCyB and the stress test.

Suggested Citation

  • Duffy, Denise & Haubrich, Joseph G. & Kovner, Anna & Musatov, Alex & Prescott, Edward Simpson & Rosen, Richard J. & Tallarini, Thomas D. & Vardoulakis, Alexandros & Yang, Emily & Zlate, Andrei, 2019. "Macroprudential Policy: Results from a Tabletop Exercise," Working Papers 191100, Federal Reserve Bank of Cleveland.
  • Handle: RePEc:fip:fedcwq:191100
    DOI: 10.26509/frbc-wp-201911
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    Keywords

    financial stability; macroprudential policy; monetary policy; tabletop exercise;

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G01 - Financial Economics - - General - - - Financial Crises
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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