ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846
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Central Banks and the New Macro-Prudential Toolkit

The new macro-prudential toolkit has its share of problems. It tends to be pro-cyclical, despite being aware that bank lending to booming sectors also concentrates risk, as the global financial crisis has shown. The emphasis of macro-prudential policy must take into account the nature of risk and its location in order to effectively guide markets by aiming at risk-managing the system at a macroeconomic level, as opposed to the tendency of using individual risk-based micro-prudential policies.

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