Macroprudential policy tools

Abstract

The financial crisis that began in 2007 has demonstrated that financial market disruptions can have substantial effects on the economy. There have been calls for reform of the regulations governing credit institutions, insurance companies, derivative markets and securities trading, in order to foster financial stability. This article explores various means available to government for both preventing financial market crises and mitigating the economic consequences of any disruptions that do occur. The main focus is on identifying means for enhancing the stability of the banking system.