Is resilience enough? The macro‐prudential reform agenda and the lacking smoothing of the cycle
GB : Blackwell Publishing
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macro‐prudential reform, financial system
After the financial crisis, central banks were entrusted with implementing an ambitious macro‐prudential reform agenda. The goal was arguably twofold, to increase the resilience of the financial system and to lower the amplitudes of the financial cycle. A decade later, the implementation of the agenda is characterized by the pursuit of measures to raise the resilience of the financial system, while tools to smoothen the cycle have been rather sidelined. To explain this difference in implementation efforts, the paper combines ideational scholarship with the analytical stance of reputational theory and analyzes the technocratic debate over macroprudential strategy among policy‐makers of the Fed, the BoE and the ECB. The paper identifies reputational concerns linked to the need for discretionary interventions, the uncertain scientific status of the concept of the cycle and missing metrics as causes for concern, leading most central banks to shy away from forcefully implementing this policy goal.