An operational macroprudential approach to financial stability requires tools that attribute system-wide risk to individual institutions. Making use of constructs from game theory, we propose an attribution methodology that has a number of appealing features: it can be used in conjunction with...

The recent global financial crisis has led central banks to rely heavily on "unconventional" monetary policies. This alternative approach to policy has generated much discussion and a heated and at times confusing debate. The debate has been complicated by the use of different definitions and...

A proper understanding of central bank operations in response to the recent financial turmoil and of their implications for the monetary policy stance and for market functioning calls for an understanding of operating frameworks. And yet, not only are these the least familiar aspect of monetary...

Historically, unusually strong increases in credit and asset prices have tended to precede banking crises. Could the current crisis have been anticipated by exploiting this relationship? We explore this question by assessing the out-of-sample performance of leading indicators of banking system...

What are liquidity crises? And what can be done to address them? This short paper brings together some personal reflections on this issue, largely based on previous work. In the process, it questions a number of commonly held beliefs that have become part of the conventional wisdom. The paper is...

Prudential tools that target financial stability need to be calibrated at the level of the financial system but implemented at the level of each regulated institution. They require a methodology for the allocation of system-wide risk to the individual institution in line with its systemic...

Over the last decade or so, addressing financial instability has become a policy priority. Despite the efforts made, policymakers are still a long way from developing a satisfactory operational framework. A major challenge complicating this task is the "fuzziness" with which financial...

This paper was presented at the Federal Reserve Bank of Kansas City's Symposium on "Monetary Policy and Uncertainty: Adapting to a Changing Economy" at Jackson Hole, Wyoming on 28-30 August 2003. The views expressed are those of the authors and do not necessarily reflect those of the BIS.

We argue that in order to achieve price stability in a sustainable way, central banks should consider paying greater attention to credit in their monetary policy strategies than is generally the case at present. Specifically, simply setting monetary policy so that a two-year inflation forecast...

This paper compares the responses of short-term bank lending rates to policy rates in a sample of 12 industrialised countries and seeks to relate them to characteristics of the financial system and of the policy environment. The degree of competition in the loan market and the clarity of the...