An Empirical Assessment of the Effectiveness of Macroprudential Policies

Abstract

The issues regarding macroprudential policy have taken great stride in aftermath of the 2007-2008 crisis; policymakers, as well as regulators, have now been working tirelessly to ensure that there will no such crisis in the nearest future. It is in view of this that we are trying to assess empirically the impact of macroprudential policies employed by regulators and policymakers. It is undeniable that it is somewhat difficult in realizing consistent results empirically due to the low level of statistical data as well as the fact that macroeconomic models employed in financial and economic systems do not take into accounts various interconnected economic systems. Regulators are faced with the challenge of empirical assessment of macroprudential policy both economic and financially since results could quite vague. Because of this, numerous methodologies have been employed in assessing the results, some of the employed methods are not limited to assessing macro stress tests, counterfactual analysis, microdata-based analysis, regression analysis just to mention but few. Research has realized that most regulators and or policymakers normally employ the panel data method as their econometric model. One fundamental issue is the panel data does not see the problem regarding limited statistical data but rather focuses on the impact of macroprudential policy tools.