A Liquidity-Based Approach to Macroprudential Policy

10 Pages Posted: 5 Oct 2016

Date Written: September 2016

Abstract

It is widely recognised that an excess of credit caused the financial crisis. In the future, one objective of macroprudential policy will be to regulate the financial cycle in order to prevent the disruptions associated with booms and busts. Tools have been available for a long time to regulate credit in specific sectors or categories, such as loan-to-value or loan-to-income ratios, as well as margin requirements. New instruments are now being developed at the aggregate level, first of all the countercyclical capital buffer. All share a common feature: they rely exclusively on the direct control of leverage.

Full publication: Macroprudential Policy

Suggested Citation

Landau, Jean-Pierre, A Liquidity-Based Approach to Macroprudential Policy (September 2016). BIS Paper No. 86s, Available at SSRN: https://ssrn.com/abstract=2844295

Jean-Pierre Landau (Contact Author)

Bank of France ( email )

Paris
France

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