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8 - The Macroprudential Toolkit

from Part II - Financial Stability and Regulatory Policy

Published online by Cambridge University Press:  29 March 2018

Philipp Hartmann
Affiliation:
European Central Bank, Frankfurt
Haizhou Huang
Affiliation:
China International Capital Corporation
Dirk Schoenmaker
Affiliation:
Erasmus Universiteit Rotterdam
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Summary

A coherent and effective approach to financial stability policy requires a policy framework. Key ingredients are an ongoing assessment of potential threats; high-quality data to inform that assessment; a comprehensive policy toolkit; criteria to assess the effectiveness of the tools and choose the right macroprudential policy tool for the job; and clear governance, and roles and responsibilities to assure implementation. Three considerations are important in deciding whether the tools may have the intended effect. First, macroprudential policy goals should be clear. Second, tools should target the cause of the problem rather than its symptoms. Third, policymakers should select tools that offer the biggest bang for the buck. Although we have significantly improved financial system resilience and the tools needed to promote it, we still have more work to do. Top priorities are to enhance the macroprudential toolkit itself and the institutional framework to implement it, and to improve the quality, scope, and accessibility of financial data needed to support it.
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Publisher: Cambridge University Press
Print publication year: 2018

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