Experiences with the ex ante appraisal of macroprudential instruments

Report submitted by a Study Group established by the Committee on the Global Financial System. The Group was chaired by Anne Le Lorier (Bank of France).

Macroprudential policy faces a range of challenges that stem from the difficulty to quantify its principal objective, financial stability, and from the absence of an established analytical paradigm to guide its conduct. These challenges are particularly relevant when setting objectives and communicating policy (see CGFS Publications, no 57) and, as discussed here, when appraising policy.

This report provides an overview of the experiences central banks have gathered with ex ante appraisals of macroprudential instruments and identifies areas where further analytical development would be particularly useful. It starts with a description of different approaches policymakers have used to produce quantitative and operational objectives for macroprudential policy, and a classification of the analytical methodologies employed in appraisals. The main part of the report discusses how these different methodologies have been used in practice to assess the impact of macroprudential instruments in different stages of practical decision-making such as: the assessment of risks and vulnerabilities as well as the selection of the appropriate instrument, the timing of the activation of the instrument, and the calibration of the intensity of the instrument. In all cases the discussion is illustrated with actual experiences in different jurisdictions.

JEL classification: E58, E60, G01, G28, D61

Keywords: macroprudential instruments, evaluation, practical experiences