ABSTRACT
This chapter reviews the main macroprudential “tools”: the instruments available to the macroprudential policymaker. It provides an assessment of the close, and often overlapping, relationship between macro and microprudential regulation. Macroprudential tools fall into two main categories: structural and cyclical. The chapter focuses on approaches taken in employing loan-to-value and debt-to-income policies, issues with their use and their effectiveness both generally and in selected jurisdictions. Swedish macroprudential policy is governed by the Swedish Council for Cooperation on Macroprudential Policy with joint representation by the Riksbank and the Finansinspektionen. The chapter examines the effectiveness of some of the tools, across an array of jurisdiction, and the potential for unintended consequences arising from any regulatory intervention across all, or a sector, of the financial services industry. Macroprudential policy must be coordinated with monetary and fiscal policy and with those undertaking similar responsibilities in other jurisdictions.
