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Rules, Discretion, and Macro-Prudential Policy
Author:
Mr. Itai Agur
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https://orcid.org/0000-0002-6150-737X
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Mr. Sunil Sharma
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Series:
IMF Working Papers
Volume/Issue:
Volume 2013: Issue 065
Language:
English
Publication Date:
08 Mar 2013
DOI:
https://doi.org/10.5089/9781475546699.001
ISBN:
9781475546699
ISSN:
1018-5941
Pages:
32
Keywords:
WP; central bank; bank regulator; regulator; bank; market; Macro-prudential policy; systemic risk; financial stability; regulation; input consist; markets regulator; market liquidity; liquid asset; repo market; central bank leadership; Liquidity; Systemic risk assessment; Commercial banks; Global
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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The paper examines the implementation of macro-prudential policy. Given the coordination, flow of information, analysis, and communication required, macro-prudential frameworks will have weaknesses that make it hard to implement policy. And dealing with the political economy is also likely to be challenging. But limiting discretion through the formulation of macro-prudential rules is complicated by the difficulties in detecting and measuring systemic risk. The paper suggests that oversight is best served by having a strong baseline regulatory regime on which a time-varying macro-prudential policy can be added as conditions warrant and permit.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund