DO REGULATORS NEED TO USE THE MACROPRUDENTIAL POLICY TOOLS TO CONTROL FINANCIAL RISKS

Charles Banini, Ransford Templeton

Abstract


The world has witnessed a number of economic challenges or crisis but none of them has received significant academic and professional interest as the great depression and the global economic crisis of 2007.  The current literature is littered with several studies about the causes and the impact of the crisis. In the aftermath of the economic crisis considered as the second most important economic crisis in the world, several attempt have been concentrated on developing appropriate models and policy responses to contain future challenges which created the crisis. There is a near consensus among economist and policy makers on the need to reorient the regulatory framework of the economic system from an individual based approach to a Macroprudential or collective management approach. This paper argues that regulators need to use macroprudential policy tools to control financial risk because of its effectiveness


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