Emerging market economies have in many ways been leaders in applying macroprudential policy tools, employing in recent years a variety of restrictions on real estate lending or other activities that were perceived to create vulnerabilities.10 Although it is probably too soon to draw clear conclusions, these experiences will help inform our understanding of these policies and their efficacy.
Promoting financial stability through a macroprudential approach If macroprudential tools are to play the primary role in the pursuit of financial stability, questions remain on which macroprudential tools are likely to be most effective, what the limits of such tools may be, and when, because of such limits, it may be appropriate to adjust monetary policy to “get in the cracks” that persist in the macroprudential framework.11 In weighing these questions, I find it helpful to distinguish between tools that primarily build through-the-cycle resilience against adverse financial developments and those primarily intended to lean against financial excesses.12 Building resilience Tools that build resilience aim to make the financial system better able to withstand unexpected adverse developments.