1 option
The Rhyme and Reason for Macroprudential Policy : Four Guideposts to Find Your Bearings / Augusto de la Torre
World Bank Open Knowledge Repository (formerly "World Bank E-Library Publications") Available online
World Bank Open Knowledge Repository (formerly "World Bank E-Library Publications")- Format:
- Book
- Government document
- Author/Creator:
- De la Torre, Augusto
- Series:
- Policy research working papers.
- World Bank e-Library.
- Language:
- English
- Subjects (All):
- Banks & Banking Reform.
- Bounded rationality.
- Collective action.
- Debt Markets.
- Economic Theory & Research.
- Emerging Markets.
- Externalities.
- Financial crises.
- Financial frictions.
- Financial policy.
- Labor Policies.
- Macroeconomics and Economic Growth.
- Macroprudential policy.
- Principal-agent problems.
- Pro-cyclical financial markets.
- Prudential oversight.
- Regulatory architecture.
- Local Subjects:
- Banks & Banking Reform.
- Bounded rationality.
- Collective action.
- Debt Markets.
- Economic Theory & Research.
- Emerging Markets.
- Externalities.
- Financial crises.
- Financial frictions.
- Financial policy.
- Labor Policies.
- Macroeconomics and Economic Growth.
- Macroprudential policy.
- Principal-agent problems.
- Pro-cyclical financial markets.
- Prudential oversight.
- Regulatory architecture.
- Physical Description:
- 1 online resource (20 pages)
- Other Title:
- Rhyme and Reason for Macroprudential Policy
- Place of Publication:
- Washington, D.C., The World Bank, 2013
- System Details:
- data file
- Summary:
- This paper explores the conceptual foundations of macroprudential policy. It does so within a framework that gradually incorporates and interacts two types of frictions (principal-agent and collective action) with two forms of rationality (full and bounded), all in the context of aggregate volatility. Four largely orthogonal rationales for macroprudential policy are identified. The first (time consistency macroprudential) arises even in the absence of externalities, not to prevent financial crises but to offset the moral hazard implications of (efficient but time inconsistent) post-crisis policy interventions. The second (dynamic alignment macroprudential) protects the less sophisticated (boundedly rational) market participants by maintaining principal-agent incentives continuously aligned along the cycle and in the face of aggregate shocks. The third (collective action macroprudential) responds to the socially inefficient yet rational instability resulting from uninternalized externalities. The fourth (collective cognition macroprudential) aims at tempering non-rational mood swings where credit-constrained rational arbitrageurs fail. Finding the right policy balance is complicated by the fact that the four dimensions face policy trade-offs and their relative importance is state-dependent, hence shifts over time.
The Penn Libraries is committed to describing library materials using current, accurate, and responsible language. If you discover outdated or inaccurate language, please fill out this feedback form to report it and suggest alternative language.