The International Aspects of Macroprudential Policy

Kristin Forbes

Annual Review of Economics, 2021, vol. 13, issue 1, 203-228

Abstract: Countries are making more active use of macroprudential tools than in the past with the goal of improving the resilience of their broader financial systems. A growing body of evidence suggests that these tools can accomplish specific domestic goals and should reduce a country's vulnerability to many domestic and international shocks. The evidence also suggests, however, that these policies are not an elixir. They will not insulate economies from volatility, and they generate leakages to the nonbank financial system and spillovers through international borrowing, lending, and other cross-border exposures. Some of these unintended consequences can mitigate the effectiveness of macroprudential policies and generate new vulnerabilities and risks. The COVID-19 crisis provides a lens to evaluate the effectiveness of current macroprudential regulations during a period of extreme market volatility and economic stress. The experience to date suggests that macroprudential tools provide some benefits and should remain a focus of macroeconomic policy, but with realistic expectations about what they can accomplish.

Keywords: macroprudential; capital flow measures; bank regulation; spillovers (search for similar items in EconPapers)
JEL-codes: E44 E58 F33 F36 F38 G18 G23 G28 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (16)

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Working Paper: The International Aspects of Macroprudential Policy (2020)
Working Paper: The International Aspects of Macroprudential Policy (2020)
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DOI: 10.1146/annurev-economics-081020-051248

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