Macroprudential Policy: What Instruments and How to Use Them? Lessons from Country Experiences

85 Pages Posted: 8 Nov 2011

See all articles by Cheng Hoon Lim

Cheng Hoon Lim

International Monetary Fund (IMF)

Alejo Costa

affiliation not provided to SSRN

Francesco Columba

Bank of Italy

P Kongsamut

International Monetary Fund (IMF)

A. Otani

International Monetary Fund (IMF)

M. Saiyid

International Monetary Fund (IMF)

Torsten Wezel

International Monetary Fund (IMF)

X. Wu

International Monetary Fund (IMF)

Date Written: October 2011

Abstract

This paper provides the most comprehensive empirical study of the effectiveness of macroprudential instruments to date. Using data from 49 countries, the paper evaluates the effectiveness of macroprudential instruments in reducing systemic risk over time and across institutions and markets. The analysis suggests that many of the most frequently used instruments are effective in reducing pro-cyclicality and the effectiveness is sensitive to the type of shock facing the financial sector. Based on these findings, the paper identifies conditions under which macroprudential policy is most likely to be effective, as well as conditions under which it may have little impact.

Keywords: Banks, Capital inflows, Credit risk, Cross country analysis, Developed countries, Emerging markets, Exchange rate regimes, Financial risk, Financial sector, Fiscal policy, Liquidity, Monetary policy

Suggested Citation

Lim, Cheng Hoon and Costa, Alejo and Columba, Francesco and Kongsamut, P and Otani, Akira and Saiyid, M. and Wezel, Torsten and Wu, Xiaoyong, Macroprudential Policy: What Instruments and How to Use Them? Lessons from Country Experiences (October 2011). IMF Working Paper No. 11/238, Available at SSRN: https://ssrn.com/abstract=1956385

Cheng Hoon Lim (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Alejo Costa

affiliation not provided to SSRN

Francesco Columba

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy
+39-06-47922131 (Phone)
+39-09-47923611 (Fax)

P Kongsamut

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Akira Otani

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

M. Saiyid

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Torsten Wezel

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States
2026237399 (Phone)

Xiaoyong Wu

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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