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Working Paper

Macroprudential supervision: from theory to policy

While there is now consensus that financial supervision has to focus on the aggregate (macroprudential), in addition to the individual (microprudential), there is no agreed macroprudential framework for measuring financial imbalances and applying policies to correct such imbalances. This paper focuses on these two open questions in the so-called time dimension of macroprudential policy.

By: , and Date: November 25, 2015 Topic: Banking and capital markets

Highlights

Financial supervision focuses on the aggregate (macroprudential) in addition to the individual (microprudential). But an agreed framework for measuring and addressing financial imbalances is lacking. We propose a holistic approach for the financial system as a whole, beyond banking.

Building on our model of financial amplification, the financial cycle is the key variable for measuring financial imbalances. The cycle can be curbed by leverage restrictions that might vary across countries and sectors.

Macroprudential supervision has been discussed since the onset of the great financial crisis, but policymakers are still slow on the ground. While the current monetary policy stance of quantitative easing may be needed to stimulate subdued growth, the risk of financial booms is increasing. We make concrete policy proposals for the design of macroprudential instruments to simplify the current framework and make it more consistent.

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By: Maria Demertzis Topic: Macroeconomic policy Date: December 9, 2021
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The New Euro Area Inflation Indicator and Target: The Right Reset?

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The new euro area inflation indicator and target: the right reset?

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Working Paper

Does money growth tell us anything about inflation?

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By: Leonardo Cadamuro and Francesco Papadia Topic: Macroeconomic policy Date: November 4, 2021
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