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Macroprudential Policy: Results from a Tabletop Exercise

Denise Duffy, Joseph Haubrich (), Anna Kovner, Alex Musatov, Edward Prescott (), Richard Rosen, Thomas Tallarini (), Alexandros Vardoulakis, Emily Yang and Andrei Zlate ()

No 201911, Working Papers from Federal Reserve Bank of Cleveland

Abstract: This paper presents a tabletop exercise designed to analyze macroprudential policy. Several senior Federal Reserve officials were presented with a hypothetical economy as of 2020:Q2 in which commercial real estate and nonfinancial debt valuations were very high. After analyzing the economy and discussing the use of monetary and macroprudential policy tools, participants were then presented with a hypothetical negative shock to commercial real estate valuations that occurred in the second half of 2020. Participants then discussed the use of the tools during an incipient downturn. Some of the findings of the exercise were that during an asset boom, there were limits to the effectiveness of US macroprudential tools in controlling narrow risks and that changes to the fed funds rate may not always simultaneously meet macroeconomic and financial stability goals. Some other findings were that during a downturn, it would be desirable to use high-frequency indicators for deciding when to release the countercyclical capital buffer (CCyB) and that tensions exist between microprudential and macroprudential goals when using the CCyB and the stress test.

Keywords: monetary policy; financial stability; tabletop exercise; macroprudential policy (search for similar items in EconPapers)
JEL-codes: E58 G01 G18 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2019-05-21
New Economics Papers: this item is included in nep-cba and nep-mac
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DOI: 10.26509/frbc-wp-201911

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