Rules, Discretion, and Macro-Prudential Policy

Author/Editor:

Itai Agur ; Sunil Sharma

Publication Date:

March 8, 2013

Electronic Access:

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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.

Series:

Working Paper No. 2013/065

Subject:

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

English

Publication Date:

March 8, 2013

ISBN/ISSN:

9781475546699/1018-5941

Stock No:

WPIEA2013065

Pages:

32

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