Graph of the number of countries having implemented cyclical prudential instruments, the inflation rate, and whether the instruments were tightened or loosened during a given time.
Since the Global Crisis, prudential instruments to address financial stability concerns have been enhanced and broadly adopted across countries. Using the recently updated International Banking Research Network Prudential Instrument database, this column shows that by 2023 most of the 64 countries considered have implemented most of the instruments. During the 2021-2023 inflation episode, cyclical prudential instruments were tightened as average inflation and policy interest rates rose. Many open questions remain on the drivers, effects, and effectiveness of prudential regulation, not least because these policies may also have unintended consequences.
Many open questions remain on the drivers, effects, and effectiveness of prudential regulation, despite its widespread enhancement and adoption across countries following the Global Financial Crisis.
E Cerutti, @rcorrea.bsky.social, L S. Goldberg, Anni Norring
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