Macro-pru tools can cut risk of credit bust – IMF paper

Authors explore whether building buffers can increase resilience over the medium term

International Monetary Fund Headquarters 2, Washington, DC
International Monetary Fund Headquarters 2, Washington, DC
Photo: John Harrington

Deploying macro-prudential tools and capital controls can cut the risk of credit booms turning to bust, new research published by the International Monetary Fund finds.

Authors Maria Arakelyan, Adam Gersl and Martin Schindler say most studies of macro-prudential policy focus on the short term, one or two years. Instead, they extend the horizon to three years, asking whether macro-prudential tools are able to build resilience as well as taming the financial cycle.

In the working paper, they

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