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Macroprudential Supervision: From Theory to Policy

Published online by Cambridge University Press:  01 January 2020

Dirk Schoenmaker  and
Peter Wierts
Dirk Schoenmaker*
Affiliation:
Rotterdam School of Management, Erasmus University, Bruegel and CEPR
Peter Wierts
Affiliation:
De Nederlandsche Bank and VU University, Amsterdam
*
E-mail: schoenmaker@rsm.nl
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Abstract

Financial supervision focuses on the aggregate (macroprudential) in addition to the individual (microprudential). But an agreed framework for measuring and addressing financial imbalances is lacking. We propose a holistic approach for the financial system as a whole, beyond banking. Building on our model of financial amplification, the financial cycle is the key variable for measuring financial imbalances. The cycle can be curbed by leverage restrictions that might vary across countries. We make concrete policy proposals for the design of macroprudential instruments to simplify the current framework and make it more consistent.

Keywords

financial cyclemacroprudential policyfinancial supervisionleverage ratioE58G18G28
Type
Research Articles
Information
National Institute Economic Review , Volume 235 , February 2016 , pp. R50 - R62
Copyright
Copyright © 2016 National Institute of Economic and Social Research

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Footnotes

The authors would like to thank Patty Duijm, Sam Langfield, Nicolas Veron, Guntram Wolff and two anonymous referees for useful comments. Views expressed are those of the authors.

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