Macroprudential policy, supervision and early-warnings of future crises

At an Asian Development Bank Seminar on Financial Regulatory Reforms in Asia in Seoul, Korea, Centre Director Paul Mizen commented on a series of research papers sponsored by the ADB on use of financial data to understand the nature of the financial system.  These papers will inform macroprudential policy recommendations by the ADB for regional central banks.  Applying their methods to Asian countries Professor Hyun Shin (Princeton) and co-authors considered the procyclicality of monetary aggregates with the financial system, demonstrating the usefulness of these data for predicting crises, and the relationship between monetary aggregates and systemic risk in closed economies such as China or India. The use of non-core liabilities as an indicator of systemic risk shows a great deal of promise, and could usefully be extended in several directions to make it a robust indicator of systemic risk. Professor Mizen’s comments are here