The risk management approach to macro-prudential policy

Arbeitspapier

Macro-prudential authorities need to assess medium-term downside risks to the real economy, caused by severe financial shocks. Before activating policy measures, they also need to consider their short-term negative impact. This gives rise to a risk management problem, an inter-temporal trade-off between expected growth and downside risk. Predictive distributions are estimated with structural quantile vector autoregressive models that relate economic growth to measures of financial stress and the financial cycle. An empirical study with euro area and U.S. data shows how to construct indicators of macro-prudential policy stance and to assess when interventions may be beneficial.

Object Details

• ISBN: 978-92-899-4751-0
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ECB Working Paper ; No. 2565

Classification and Topics

• Classification: Wirtschaft ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Multiple or Simultaneous Equation Models: Panel Data Models; Spatio-temporal Models
• Subject: Growth-at-risk ; stress testing ; quantile vector autoregression ; financial conditions ; macro-prudential policy

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Chavleishvili, Sulkhan ; Engle, Robert F. ; Fahr, Stephan ; Kremer, Manfred ; Manganelli, Simone ; Schwaab, Bernd
• Event: Veröffentlichung
• (who): European Central Bank (ECB)
• (where): Frankfurt a. M.
• (when): 2021

Further information

• DOI: doi:10.2866/841668
• Handle: http://hdl.handle.net/10419/237704
• Last update: 10.03.2025, 11:42 AM CET