Learning from the history of American macroprudential policy

Contrary to impressions based on recent years, the United States of America has conducted an active policy of cyclical macroprudential intervention over most of the century since the Federal Reserve’s foundation in 1913. Douglas Elliott was the co-author of a comprehensive study of these interventions, including a preliminary statistical analysis of their effects. In this paper, he offers a number of lessons for future macroprudential policy, based on America’s history. In particular: • macroprudential policies are feasible even in a generally non-interventionist context; • political support can be obtained for macroprudential tightening; • macroprudential and monetary policy blend together; • cyclical macroprudential policy can affect credit supply as intended; • different economic sectors can be targeted; • macroprudential policy may be easiest when measures appear technical; • a major mistake can make future macroprudential policy much harder; • macroprudential policy may be most easily done through a single body.