Rules, Discretion, and Macro-Prudential Policy

March 8, 2013

Preview Citation

Format: Chicago

Itai Agur, and Sunil Sharma. Rules, Discretion, and Macro-Prudential Policy, (USA: International Monetary Fund, 2013) accessed November 23, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Asset and liability management, Banking, Commercial banks, Financial crises, Financial institutions, Financial sector policy and analysis, Liquidity, Systemic risk, Systemic risk assessment

Keywords: Bank, Bank regulator, Central bank, Central bank leadership, Commercial banks, Financial stability, Global, Input consist, Liquid asset, Liquidity, Macro-prudential policy, Market, Market liquidity, Markets regulator, Regulation, Regulator, Repo market, Systemic risk, Systemic risk assessment, WP

Publication Details

Pages:

32
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2013/065
Stock No:

WPIEA2013065
ISBN:

9781475546699
ISSN:

1018-5941

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