Report submitted to the G20 Finance Ministers and Central Bank Governors
Economies around the world currently face the extraordinary challenge of
dealing with surging inflation and tightening global financial
conditions amid elevated financial vulnerabilities. This highlights the
importance of a macro-financial stability framework (MFSF) designed to
limit the emergence of those vulnerabilities and mitigate their
consequences. The report outlines the key features of MFSFs that could
durably safeguard macro-financial stability, with a particular emphasis
on how to deal with the risks linked to ebbs and flows in global
financial conditions. MFSFs combine monetary, fiscal and macroprudential
policies with FX intervention and capital flow management measures
within a holistic framework. The aim is to prevent the interaction of
macroeconomic and financial forces from undermining macroeconomic and
financial stability. This requires preventive macro-financial stability
policies to ward off vulnerabilities and to build policy buffers in good
times so that they can be drawn down in bad times. Relying on the full
array of policies is essential to achieve a balanced approach and to
avoid overburdening individual ones.
full paper
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