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Would Macroprudential Regulation Have Prevented the Last Crisis? by David Aikman; Jonathan Bridges; Anil Kashyap; Caspar Siegert is a Economics, Econometrics and Finance article available to read on EtoBox.

What is Would Macroprudential Regulation Have Prevented the Last Crisis? about?

How well equipped are today’s macroprudential regimes to deal with a rerun of the factors that led to the global financial crisis? To address the factors that made the last crisis so severe, a macroprudential regulator would need to implement policies to tackle vulnerabilities from financial system leverage, fragile funding structures, and the build-up in household indebtedness. We specify and calibrate a package of policy interventions to address these vulnerabilities—policies that include implementing the countercyclical capital buffer, requiring that banks extend the maturity of their funding, and restricting mortgage lending at high loan-to-income multiples. We then assess how well placed are two prominent macroprudential regulators, set up since the crisis, to implement such a package. The US Financial Stability Oversight Council has not been designed to implement such measures and would therefore make little difference were we to experience a rerun of the factors that preceded the last crisis. A macroprudential regulator modeled on the UK’s Financial Policy Committee stands a better chance because it has many of the necessary powers. But it too would face challenges associate

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Author

David Aikman; Jonathan Bridges; Anil Kashyap; Caspar Siegert

Published

2019

Language

EN

Field

Economics, Econometrics and Finance (Social Sciences)