FBE - Credit Cycles and their Role for Macro-Prudential Policy (étude)
28/11/2011 FBEThe report has the following objectives:
When addressing the first objective in Chapter 1, the literature overview leads to the conclusion that the practice of macro-prudential policy is at its beginning, just as monetary policy was after World War II. In the context of the global economic and financial crisis, which has unveiled the need for better macro-prudential supervision and international coordination, macro-prudential policy has recently been institutionalised through the establishment of the European Systemic Risk Board in Europe, and the Financial Stability Oversight Council in the US. Nevertheless, these new authorities are yet to define their policy priorities, their stance with respect to other policy bodies (e.g. with respect to the micro-prudential supervisor, – the European Banking Authority - and the ECB as an executor of monetary policy), and the toolkit which they can use in order to monitor the economy and to operate in case of need. One of the important gaps in macro-prudential analysis is in understanding the nature and the behaviour of credit, and its interaction with the real economy. The present report aims to help fill such a gap.
When addressing the second objective in Chapter 2, an empirical study of the credit cycles was undertaken, which focuses on 12 developed economies: the United States, the United Kingdom, Germany, France, Spain, Italy, the Netherlands, Finland, Austria, Ireland, Greece and Portugal.
A number of findings arise from this empirical study.
to summarise the already documented thinking on macro-prudential policy, with a special focus on one of the macro-prudential policy’s cornerstones, the cycle of credit; to undertake a pioneering empirical analysis of the credit cycle and the business cycle, in order to enhance understanding of the behaviour of the credit cycle and its interaction with the real economy; to consider the empirical findings and their possible implications in the context of current financial sector reform and shaping of the macro-prudential policy; and more specifically, to point to the risk that policy measures which have the effect of dampening credit availability, may also have a damaging effect on the economy.
http://www.ebf-fbe.eu/uploads/28%20Nov-2011-EMAC.pdf
When addressing the first objective in Chapter 1, the literature overview leads to the conclusion that the practice of macro-prudential policy is at its beginning, just as monetary policy was after World War II. In the context of the global economic and financial crisis, which has unveiled the need for better macro-prudential supervision and international coordination, macro-prudential policy has recently been institutionalised through the establishment of the European Systemic Risk Board in Europe, and the Financial Stability Oversight Council in the US. Nevertheless, these new authorities are yet to define their policy priorities, their stance with respect to other policy bodies (e.g. with respect to the micro-prudential supervisor, – the European Banking Authority - and the ECB as an executor of monetary policy), and the toolkit which they can use in order to monitor the economy and to operate in case of need. One of the important gaps in macro-prudential analysis is in understanding the nature and the behaviour of credit, and its interaction with the real economy. The present report aims to help fill such a gap.
When addressing the second objective in Chapter 2, an empirical study of the credit cycles was undertaken, which focuses on 12 developed economies: the United States, the United Kingdom, Germany, France, Spain, Italy, the Netherlands, Finland, Austria, Ireland, Greece and Portugal.
A number of findings arise from this empirical study.
to summarise the already documented thinking on macro-prudential policy, with a special focus on one of the macro-prudential policy’s cornerstones, the cycle of credit; to undertake a pioneering empirical analysis of the credit cycle and the business cycle, in order to enhance understanding of the behaviour of the credit cycle and its interaction with the real economy; to consider the empirical findings and their possible implications in the context of current financial sector reform and shaping of the macro-prudential policy; and more specifically, to point to the risk that policy measures which have the effect of dampening credit availability, may also have a damaging effect on the economy.
http://www.ebf-fbe.eu/uploads/28%20Nov-2011-EMAC.pdf