Would macroprudential regulation have prevented the last crisis?

David Aikman (), Jonathan Bridges (), Anil Kashyap and Caspar Siergert
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Caspar Siergert: Bank of England, Postal: Bank of England, Threadneedle Street, London, EC2R 8AH

No 747, Bank of England working papers from Bank of England

Abstract: How well equipped are today’s macroprudential regimes to deal with a re-run of the factors that led to the global financial crisis? We argue that a large proportion of the fall in US GDP associated with the crisis can be explained by two factors: the fragility of financial sector — represented by the increase in leverage and reliance on short-term funding at non-bank financial intermediaries — and the build-up in indebtedness in the household sector. We describe and calibrate the policy interventions a macroprudential regulator would wish to make to address these vulnerabilities. And we compare and contrast how well placed two prominent macroprudential regulators — the US Financial Stability Oversight Council and the UK’s Financial Policy Committee — are to implement these policy actions.

Keywords: Financial crises; macroprudential policy; leverage; short-term wholesale funding; credit crunch; household debt; aggregate demand externality; countercyclical capital buffer; loan to value ratio; loan to income ratio (search for similar items in EconPapers)
JEL-codes: G01 G21 G23 G28 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2018-08-03
New Economics Papers: this item is included in nep-ban, nep-cba, nep-cfn, nep-mac and nep-mon
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Citations: View citations in EconPapers (2)

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Journal Article: Would Macroprudential Regulation Have Prevented the Last Crisis? (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0747

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