Working Paper: Ahead of the Cycle

Working Paper - October 2019 - No. 143

Authors Korsgaard, Søren
Subject Financial stability; Macroprudential policy
Type Working paper
Year 2019
Published 17 October 2019
The paper describes how to conduct macroprudential policy in an environment where economic indicators move in a cyclical fashion, policy works with a lag, and there are adjustment costs to changing policy. It shows that policy instruments such as the countercyclical capital buffer should be set not only based on the present state of the cycle, but also on where the cycle is heading.