Policy in adaptive financial markets—the use of systemic risk early warning tools

Dieter Gramlich, Mikhail Oet and Stephen J. Ong

No 1309, Working Papers (Old Series) from Federal Reserve Bank of Cleveland

Abstract: How can a systemic risk early warning system (EWS) facilitate the financial stability work of policymakers? In the context of evolving financial market dynamics and limitations of microprudential policy, this study examines new directions for financial macroprudential policy. A flexible macroprudential approach is anchored in strategic capacities of systemic risk EWSs. Tactically, macroprudential applications are founded on information about the level, structure, and institutional drivers of systemic financial stress and aim to manage the financial system risk and imbalances in two dimensions: across time and institutions. Time-related EWS policy applications are analyzed in pursuit of prevention and mitigation. EWS applications across institutions are considered via common exposures and interconnectedness. Care must be taken in the calibration of macroprudential applications, given their reliance on quality of the underlying systemic risk-modeling framework.

Keywords: Business cycles; Regulation; Financial stability (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-ban, nep-cba, nep-mac and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.26509/frbc-wp-201309 Persistent link
https://www.clevelandfed.org/-/media/project/cleve ... arning-tools-pdf.pdf Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedcwp:1309

Ordering information: This working paper can be ordered from

DOI: 10.26509/frbc-wp-201309

Access Statistics for this paper

More papers in Working Papers (Old Series) from Federal Reserve Bank of Cleveland Contact information at EDIRC.
Bibliographic data for series maintained by 4D Library ().