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Modelling the Macroprudential Balancing Act

Angus Foulis and Jon Bridges

Macropru is new.  Although many countries have now used macroprudential tools, there is no well-established guidebook to help policymakers develop their reaction functions.  The principles behind macroprudential strategy are still being explored, with recent speeches by Alex Brazier, Vitor Constancio, and a review by the IMF,FSB & BIS.  This post illustrates how the balancing act at the heart of the macroprudential debate can be formalised – it is a call to arms for further research, rather than the definitive guide.

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Filed under Financial Stability, Macroprudential Regulation