Why macropru can end up being procyclical

Jon Danielsson, Robert Macrae, Dimitrios Tsomocos and Jean-Pierre Zigrand

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Discretionary macroprudential policies aim to be countercyclical by adjusting risk-taking across the financial cycle. This column argues that the opposite effect may happen in certain cases. Depending on how regulators measure risk and how they react, the eventual outcome may well be procyclical, with serious unintended consequences.

Keywords: macropru; risk-taking; financial cycle; macroprudential; pro cyclical (search for similar items in EconPapers)
JEL-codes: E0 (search for similar items in EconPapers)
Date: 2016-12-15
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published in VoxEU, 15, December, 2016

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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:70711

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