Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/174530
Authors: 
Popoyan, Lilit
Year of Publication: 
2016
Series/Report no.: 
LEM Working Paper Series 2016/21
Abstract: 
After the destructive impact of the global financial crisis of 2008, many believe that pre-crisis financial market regulation did not take the "big picture" of the system suffciently into account and, subsequently, financial supervision mainly "missed the forest for the trees". As a result, the need for macroprudential aspects of regulation emerged, which has recently become the focal point of many policy debates. This has also led to intense discussion on the contours of monetary policy after the post-crisis "new normal". Here, I review recent progress in empirical and theoretical research on the effectiveness of macroprudential tools, as well as the current state of the debate, in order to extract common policy conclusions. The work highlights that, despite the achievements in the literature, the current experience and knowledge of how macroprudential instruments work, their calibration, and the mechanisms through which they interact with each other and with monetary policy are rather limited and conflicting. Moreover, I critically survey and note the current challenges faced by macroprudential regulation in creating stable, yet effcient financial systems. At the same time, I emphasize the importance of accepting that many risks may remain, requiring that we proceed prudently and develop better plans for future crises.
Subjects: 
macroprudential policy
Basel III regulation
capital adequacy ratio
counter-cyclical capital buffer
leverage requirement
systemic risk
crisis management
financial stability
JEL: 
E02
E32
E52
E58
E6
G01
G21
G28
Document Type: 
Working Paper

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