Open AccessMacroprudential Policy Versus Other Economic Policies
Author(s) -
Eva Lorenčič,
AUTHOR_ID,
Mejra Festić,
AUTHOR_ID
Publication year - 2021
Publication title -
croatian economic survey
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.191
H-Index - 8
ISSN - 1330-4860
DOI - 10.15179/ces.23.2.2
Subject(s) - financial stability , order (exchange) , monetary policy , financial crisis , economics , macroprudential regulation , fiscal policy , financial regulation , stability (learning theory) , finance , financial system , compromise , systemic risk , macroeconomics , economic policy , business , political science , computer science , machine learning , law
After the global financial crisis of 2007, macroprudential policy instruments have gained in recognition as a crucial tool for enhancing financial stability. Monetary policy, fiscal policy, and microprudential policy operate with a different toolkit and focus on achieving goals other than the stability of the financial system as a whole. In ligh of this, a fourth policy – namely macroprudential policy – is required to mitigate and prevent shocks that could destabilize the financial system as a whole and compromise financial stability. The aim of this paper is to contrast macroprudential policy with other economic policies and explain why other economic policies are unable to attain financial stability, which in turn justifies the need for a separate macroprudential policy, the ultimate goal whereof is precisely financial stability of the financial system as a whole. Our research results based on the descriptive research method indicate that, in order to prevent future financial crises, it is indispensable to combine both the microprudential and the macroprudential approach to financial stability. This is because the causes of the crises are often such that they cannot be prevented or mitigated by relying only on microprudential or only on macroprudential policy instruments.