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Macroprudential Policy: The Need for a Coherent Policy Framework

Duisenburg School of Finance Policy Paper No. 13

21 Pages Posted: 3 Jul 2011  

Dirk Schoenmaker

Rotterdam School of Management, Erasmus University; Erasmus Research Institute of Management (ERIM); Centre for Economic Policy Research (CEPR)

Peter Wierts

De Nederlandsche Bank; VU University Amsterdam

Date Written: July 1, 2011

Abstract

The recent literature on macroprudential policy contains several suggestions for possible instruments. This paper puts forward and implements a method for arriving at a coherent policy framework. It starts by defining the role of macroprudential policy in the overall policy framework for the monetary and financial system. It then specifies the objective, intermediate targets (pillars), instruments, decision-making, accountability, and the legal base. We introduce a two pillar strategy. The basic presumption is that each instrument should be related to its intermediate target (pillar). This allows us to select a limited set of core instruments aimed at stabilising financial imbalances (pillar 1) and addressing externalities that arise from interconnections in the financial system (pillar 2).

Keywords: Macroprudential policy, monetary policy, financial stability, financial supervision, policy frameworks

JEL Classification: E44, E58, E61, G28

Suggested Citation

Schoenmaker, Dirk and Wierts, Peter, Macroprudential Policy: The Need for a Coherent Policy Framework (July 1, 2011). Duisenburg School of Finance Policy Paper No. 13. Available at SSRN: https://ssrn.com/abstract=1876595 or http://dx.doi.org/10.2139/ssrn.1876595

Dirk Schoenmaker (Contact Author)

Rotterdam School of Management, Erasmus University ( email )

P.O. Box 1738
Room T08-21
3000 DR Rotterdam
Netherlands

HOME PAGE: http://www.rsm.nl/people/dirk-schoenmaker/

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Centre for Economic Policy Research (CEPR) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Peter Wierts

De Nederlandsche Bank ( email )

P.O. Box 98
1000 AB Amsterdam
Netherlands

VU University Amsterdam ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands

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