Bank Underground Blog Entry
by Kristina Bluwstein and Alba Patozi
“Measuring financial stability is very difficult. Measuring the effectiveness of policies affecting financial stability even more so. Not only is the objective of financial stability an elusive concept, but policies targeting financial stability are often complex, technical, and very slowly implemented. In spite of this, the usage of macroprudential tools in both advanced economies (AEs) and emerging market economies (EMEs) has more than tripled (Chart 1) over the last 30 years. Communications about these tools have also sharply increased from almost non-existent pre-GFC to hundreds of speeches per year (Chart 2). In a recent working paper, we try to estimate the effect of these macroprudential policy announcements on financial stability in the UK by constructing a novel series of unexpected announcements and measuring their effect on systemic risk in the financial sector. […]”