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Central Bank Independence and Macro-Prudential Regulation

Author: Mr.Kenichi Ueda

Publisher: International Monetary Fund

Published: 2012-04-01

Total Pages: 27

ISBN-13: 1475502915

We consider the optimality of various institutional arrangements for agencies that conduct macro-prudential regulation and monetary policy. When a central bank is in charge of price and financial stability, a new time inconsistency problem may arise. Ex-ante, the central bank chooses the socially optimal level of inflation. Ex-post, however, the central bank chooses inflation above the social optimum to reduce the real value of private debt. This inefficient outcome arises when macro-prudential policies cannot be adjusted as frequently as monetary. Importantly, this result arises even when the central bank is politically independent. We then consider the role of political pressures in the spirit of Barro and Gordon (1983). We show that if either the macro-prudential regulator or the central bank (or both) are not politically independent, separation of price and financial stability objectives does not deliver the social optimum.

Macroprudential Policy - An Organizing Framework - Background Paper

Author: International Monetary Fund. Monetary and Capital Markets Department

Publisher: International Monetary Fund

Published: 2011-03-14

Total Pages: 33

ISBN-13: 1498339174

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MCM conducted a survey in December 2010 to take stock of international experiences with financial stability and the evolving macroprudential policy framework. The survey was designed to seek information in three broad areas: the institutional setup for macroprudential policy, the analytical approach to systemic risk monitoring, and the macroprudential policy toolkit. The survey was sent to 63 countries and the European Central Bank (ECB), including all countries in the G-20 and those subject to mandatory Financial Sector Assessment Programs (FSAPs). The target list is designed to cover a broad range of jurisdictions in all regions, but more weight is given to economies that are systemically important (see Annex for details). The response rate is 80 percent. This note provides a summary of the survey’s main findings.

Macroprudential Policy - An Organizing Framework

Author: International Monetary Fund. Monetary and Capital Markets Department

Publisher: International Monetary Fund

Published: 2011-03-14

Total Pages: 60

ISBN-13: 1498339166

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Macroprudential policy is a complement to microprudential policy and it interacts with other types of public policy that have an impact on systemic financial stability. Indeed, prudential regulation, as carried out in the past, also had some macroprudential aspects, and the recent crisis has reinforced this focus; hence, a clear separation between “micro” and “macro” prudential, if useful conceptually, is difficult to delineate in practice. Moreover, no matter how different policy mandates are structured, financial stability tends to be a common responsibility, reflecting the far reaching consequences of financial crises. This calls for coordination across policies, to ensure that systemic risk is comprehensively addressed. Equally important, macroprudential policy is no substitute for sound policies more broadly, including, in particular, strong prudential regulation and supervision, and sound macroeconomic policies. Operational independence in other policy areas, including monetary and microprudential policy, should not be undermined in the name of macroprudential policy. Finally, given the global nature of the financial system, the multilateral aspects of macroprudential policy will need to be fully considered—an important aspect that is only touched upon in this paper.

Central Bank Independence, Policies and Reforms

Author: Marianne Ojo D Delaney PhD

Publisher:

Published: 2016

Total Pages: 1

ISBN-13:

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Whilst economic, political linkages and relationships constitute the theme of this paper, the paper also attempts to address why central bank independence still lacks certain vital attributes which embody adequate governance and accountability mechanisms -- which are necessary if better results in relation to longer term economic and political objectives, in particular, are to be achieved.From this perspective, the growing importance of the shift to a focus on distinguishing between micro and macro prudential regulation is illustrated. The need for such distinction is not just evidenced through the creation of agencies responsible for such affairs within particular jurisdictions which are considered in this paper, but also through the increased realisation and need for greater focus on decision making responsibilities which are to be assigned to political and economic entities at supra national levels.Financial stability, it appears, has more to do with a mere focus on longer term objectives. Financial stability is also concerned with the ability to sustain long term policy objectives whilst being flexible enough to respond effectively to short term unpredictabilities.

Institutional Arrangements for Macroprudential Policy in Asia

Author: Cheng Hoon Lim

Publisher: International Monetary Fund

Published: 2013-07-17

Total Pages: 22

ISBN-13: 1484338367

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This paper surveys institutional arrangements for macroprudential policy in Asia. Central banks in Asia typically have a financial stability mandate, and play a key role in the macroprudential framework. Smaller and more open economies with prudential regulation inside the central bank tend to have institutional arrangements that give the central bank a leading role. In larger and more complex economies where prudential regulation is outside the central bank, the financial stability mandate is usually shared with other agencies and the government tends to play a leading role. Domestic policy coordination is typically performed by a financial stability committee/other coordination body while cross-border cooperation is largely governed by Memoranda of Understanding.

Central Bank Regulation and the Financial Crisis

Author: Miao Han

Publisher: Springer

Published: 2015-10-20

Total Pages: 330

ISBN-13: 1137563087

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The respective legal frameworks that control central banks are shaped by whether they are market oriented or government controlled. However such stark distinction between these two categories has been challenged in view of the varying styles of crisis management demonstrated by different central banks during the crisis. This book uses comparative analysis to investigate how the global financial crisis challenged the role played by central banks in maintaining financial stability. Focusing on four central banks including the US Federal Reserve System, the Bank of England, the Bank of Japan and the People's Bank of China, it illustrates the similarities between the banks prior to the crisis, and their similar policy responses in the wake of the crisis. It demonstrates how each operated with varying levels of independence while performing very differently and facing different tasks. The book identifies some central explanatory variables for this behavior, addressing the mismatch of similar risk management solutions and varying outcomes. Central Bank Regulation and The Financial Crisis: A Comparative Analysis explores the legal challenges within central bank regulation presented by the global financial crisis. It emphasizes the importance of, and the limitations involved in, legal order and argue that in spite of integration and globalization, significant differences exist in central banks' approaches to risk management and financial stability.

Handbook of Central Banking, Financial Regulation and Supervision

Author: S. Eijffinger

Publisher: Edward Elgar Publishing

Published: 2011-01-01

Total Pages: 673

ISBN-13: 1849805768

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ÔThis Handbook is a must read for policy makers and practitioners alike as well as excellent reading for advanced academic courses in international banking.Õ Ð Allard Bruinshoofd, SUERF ÔThis collection of papers is essential reading for anyone interested in central banking, regulation and supervision. Sylvester Eijffinger and Donato Masciandaro have brought together contributions from the leading academics, central bankers and regulators, providing the most up-to-date analysis of this critical subject.Õ Ð Paul Mizen, University of Nottingham, UK This stimulating and original Handbook offers an updated and systematic discussion of the relationship between central banks, financial regulation and supervision after the global financial crisis. The crisis has raised new questions about the compatibility of monetary and financial stability, which are changing the face of central banking and its relationships with the architecture of financial regulation and supervision. The Handbook explores on both the economics and political economy of the topic, in order to understand how and why reforms of the role of the central banks can be designed and implemented. The general suggestion is that future effectiveness of the central banking architecture will depend on its ability to ensure the consistency between the monetary actions in normal and extraordinary times. Consequently the possible paths in the central bank strategies and tactics, as well as in the classic concepts of independence, accountability and transparency, are analyzed and discussed. With chapters written by outstanding scholars in economics, this lucid Handbook will appeal to academics, policymakers and practitioners, ranging from central bankers and supervisory authorities to financial operators. Among the academics it would be of particular interest to financial and monetary economists (including postgraduate students), but the institutional slant and the central theme of relations between economics, institutional settings and politics will also be invaluable for political scientists.

Inflation Versus Central Bank Independence? Banking Regulation and Financial Stability in the U.S. And Germany

Author: Sigurt Vitols

Publisher:

Published: 2004

Total Pages: 54

ISBN-13:

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Most recent discussion of the relationship between the banking system and macroeconomic performance have focused on the degree of independence of the central bank as the key variable influencing the choice between inflation and unemployment. This paper argues that the stability of the financial system is a goal of central banks with at least as much priority as the other two goals, and that tight money policies implemented to achieve monetary stability may conflict with the goal of financial system stability; furthermore, the nature of regulation and underlying health of the financial system is a crucial factor influencing the extent of the monetary versus financial system stability tradeoff dilemma. The erosion of prudential regulation and increasing weakness of large segments of the financial system in the US, in large part due to arbitrage between competing regulatory authorities, has since the 1960s put the Federal Reserve Board in the dilemma of controlling inflation versus protecting financial system stability. The German Bundesbank in contrast has had a freer reign in monetary policy, since corporatist bank regulation including strict prudential standards and the prohibition of potential bank competitors has resulted in a stronger underlying financial structure.

Central Bank Independence

Author: Jan Kleineman

Publisher: BRILL

Published: 2021-10-18

Total Pages: 238

ISBN-13: 9004481303

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In December 1999, prior to the forming of a Stockholm Centre for Commercial Law, an international symposium entitled Central Bank Independence was held at the Department of Law at Stockholm University in co-operation with the Swedish Central Bank (The Riksbank) and Queen Mary and Westfield College, London University. The participants were principally political, economic and legal specialists in the field, all with considerable international experience. This led to the topic being examined in detail from many different perspectives. This publication includes contributions by the participants and contains many important facts for those readers who wish to study and understand the different consequences of the yielding of control over financial policymaking by the traditional political organisations to a body of experts. For readers in some countries, who realise that the subject will revolutionise traditional Constitutional and Administrative Law, the topic and therefore this publication, cannot be ignored.

Macroprudential and Microprudential Policies

Author: Jacek Osinski

Publisher: International Monetary Fund

Published: 2013-06-21

Total Pages: 28

ISBN-13: 1484369998

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Effective arrangements for micro and macroprudential policies to further overall financial stability are strongly desirable for all countries, emerging or advanced. Both policies complement each other, but there can also be potential areas of overlap and conflict, which can complicate this cooperation. Organizing their very close interactions can help contain these potential tensions. This note clarifies the essential features of macroprudential and microprudential policies and their interactions, and delineates their borderline. It proposes mechanisms for aligning both policies in the pursuit of financial stability by identifying those elements that are desirable for effective cooperation between them. The note provides general guidance. Actual arrangements will need take into account country-specific circumstances, reflecting the fact that that there is no “one size fits all.”