IMF paper advocates hybrid discretion and rules-based macro-prudential policy


A working paper, published by the International Monetary Fund, suggests that an optimal macro-prudential policy combines elements of both rules-based and discretionary policy-making.

Rules, Discretion and Macro-Prudential Policy by Itai Agur and Sunil Sharma notes that both forms of policy-making have flaws. The authors say a discretionary, time-varying policy "may face resistance" from special interests. However, a purely rules-based approach is hampered by difficulties inherent in assessing

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