Macroprudential Policy : The Need for a Coherent Policy Framework

Dirk Schoenmaker, Peter Wierts

Research output: Contribution to JournalArticleAcademic

Abstract

The recent literature on macroprudential policy contains several suggestions for\npossible instruments. This paper puts forward and implements a method for arriving at a\ncoherent policy framework. It starts by defining the role of macroprudential policy in\nthe overall policy framework for the monetary and financial system. It then specifies the\nobjective, intermediate targets (pillars), instruments, decision-making, accountability,\nand the legal base. We introduce a two pillar strategy. The basic presumption is that\neach instrument should be related to its intermediate target (pillar). This allows us to\nselect a limited set of core instruments aimed at stabilising financial imbalances (pillar\n1) and addressing externalities that arise from interconnections in the financial system\n(pillar 2).
Original languageEnglish
Pages (from-to)1-21
Number of pages21
JournalDSF Policy Paper
Volume13
DOIs
Publication statusPublished - 2011

Keywords

  • Financial Regulation
  • macro-prudential

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