Question
The modern financial system involves many different types of assets and markets, and the rules designed to safeguard it are just as diverse.Monetary policy, prudential
The modern financial system involves many different types of assets and markets, and the rules designed to safeguard it are just as diverse.Monetary policy, prudential regulation through capital adequacy and leverage caps and counter cyclical buffers are but a few. Expecting regulators to identify bubbles in advance and then design rules to deflate them may be optimistic . But if countries are to avoid past mistakes, macro prudential regulation may need to become a permanent part of how they manage their economies.
Critically discuss the success of these macro-prudential policies that are being used in Australia and other parts of the world that are aiming to control a perceived housing bubble.
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