Evaluating the Net Benefits of Macroprudential Policy: A Cookbook

Nicolas Arregui, Jaromir Benes, Ivo Krznar, Srobona Mitra and Andre Santos

No 2013/167, IMF Working Papers from International Monetary Fund

Abstract: The paper proposes a simple, new, analytical framework for assessing the cost and benefits of macroprudential policies. It proposes a measure of net benefits in terms of parameters that can be estimated: the probability of crisis, the loss in output given crisis, policy effectiveness in bringing down both the probability and damage during crisis, and the output-cost of a policy decision. It discusses three types of policy leakages and identifies instruments that could best minimize the leakages. Some rules of thumb for policymakers are provided.

Keywords: WP; economic activity; cost of capital; banking sector; interest rate; Macroprudential Policy; Cost and Benefits; Policy Effectiveness; credit growth; capital requirement; house price growth; risk weight; parent bank; crisis risk; growth cap; crisis cost; asset price growth; bank capitalization; liquidity risk indicator; Credit; Loans; Housing prices; Europe; Global (search for similar items in EconPapers)
Pages: 73
Date: 2013-07-17
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Citations: View citations in EconPapers (66)

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