MACROPRUDENTIAL REGULATION AS A NEW METHODOLOGY FOR MACROECONOMIC POLICY MAKERS

Abstract

The article argues that the macroprudential regulation can be used to the research in macroeconomic field as a new methodological tool. The main goal of macroprudential regulation is solving the crisis by the mitigation of risks of financial systems as a whole. It was introduced in macroeconomics in the late 2000s as an opposition of microprudential regulations. Macroprudential regulation is used as a new ingredient to fill the gap between the macroeconomic policy and research by analyzing it as a whole. It is generally based on two key elements: First, macroprudential methodology strengthens the resilience of the financial system as a whole. Second, it limits a system-wide excesses on asset and credit markets. In other words, macroprudential methodology is concerned with the stability of the entire financial system, and not of individual institutions.
The article aims to propose an alternative methodology to the macroeconomic policy making and research. This new method, based on macroprudential regulation should allow researchers to answer some fundamental questions, like how to identify the market failures for financial crisis analysis and which macroprudential regulations should be used to correct them. In the present article, the theory of this macroeconomical methodology is being compared with other methods. Macroprudential regulation is provided with cross-country analysis, which highlights the practical aspects of the implementation. However the author argues that even if other countries experiences are interesting to take into account, home country context will define the exact methodology of macroprudetial regulation.