Central Banks and Macroprudential Policies: Economics and Politics

21 Pages Posted: 15 May 2018

See all articles by Donato Masciandaro

Donato Masciandaro

Bocconi University - Department of Economics

Date Written: May 2018

Abstract

The 2007-2008 global financial crisis highlighted the importance of establishing macroprudential architectures to address problems of financial stability. Central banks are always part of macroprudential settings, but their role is far from homogeneous across countries. How can this heterogeneity be explained? The aim of the chapter is twofold. First, it offers a systematic review of the economics of central bank involvement in macroprudential policies, which leads to the conclusion that political motivations are highly relevant drivers. Second, given this insight, it explores the institutional settings in 31 advanced and emerging market economies and sheds light on several key drivers of the central banker’s role as a macroprudential supervisor: central bankers who are already in charge of microeconomic supervision and less politically independent are more likely to be granted extended macroprudential powers. The same is true for central bankers who have low levels of monetary policy discretion.

Suggested Citation

Masciandaro, Donato, Central Banks and Macroprudential Policies: Economics and Politics (May 2018). BAFFI CAREFIN Centre Research Paper No. 2018-78, Available at SSRN: https://ssrn.com/abstract=3178576 or http://dx.doi.org/10.2139/ssrn.3178576

Donato Masciandaro (Contact Author)

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy

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