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Rules, Discretion, and Macro-Prudential Policy

Itai Agur () and Sunil Sharma ()

No 13/65, IMF Working Papers from International Monetary Fund

Abstract: The paper examines the implementation of macro-prudential policy. Given the coordination, flow of information, analysis, and communication required, macro-prudential frameworks will have weaknesses that make it hard to implement policy. And dealing with the political economy is also likely to be challenging. But limiting discretion through the formulation of macro-prudential rules is complicated by the difficulties in detecting and measuring systemic risk. The paper suggests that oversight is best served by having a strong baseline regulatory regime on which a time-varying macro-prudential policy can be added as conditions warrant and permit.

Keywords: Financial crises; Financial stability; Systemic risk; Macro-prudential policy, regulation, rules, decision makers, regulations, Government Policy and Regulation, Government Policy and Regulation, (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-cba and nep-mac
Date: 2013-03-08
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