IDEAS home Printed from https://ideas.repec.org/a/cbi/qtbart/y2017m04p62-80.html
   My bibliography  Save this article

The Role of Macroprudential Indicators in Monitoring Systemic Risk and Setting Policy

Author

Listed:
  • Ryan, Ellen

    (Central Bank of Ireland)

Abstract

The financial crisis demonstrated the damaging effects that the build-up of systemic risk in the financial system can have. However, due to the complex and constantly evolving nature of the modern financial system, monitoring systemic risk is not a straightforward task. As part of its systemic risk monitoring framework, the Central Bank maintains over 80 macroprudential indicators which reflect the multifaceted nature of systemic risk. The effectiveness of these indicators can be further enhanced by establishing indicator values associated with elevated risk levels and through the use of visualisation methods, such as heatmaps. While these indicators are used throughout the policy making process, they are not mechanically tied to policy decisions and policy maker judgement also plays a central role. This paper discusses the Central Bank’s approach to the use of macroprudential indicators in policy setting and provides an overview of a number of key indicators.

Suggested Citation

  • Ryan, Ellen, 2017. "The Role of Macroprudential Indicators in Monitoring Systemic Risk and Setting Policy," Quarterly Bulletin Articles, Central Bank of Ireland, pages 62-80, April.
    • Handle: RePEc:cbi:qtbart:y:2017:m:04:p:62-80
    as

    Download full text from publisher

    File URL: https://www.centralbank.ie/docs/default-source/publications/quarterly-bulletins/quarterly-bulletin-signed-articles/role-of-macroprudential-indicators-in-monitoring-systemic-risk-and-setting-policy.pdf?sfvrsn=8
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Hajime Inaoka & Takuto Ninomiya & Ken Taniguchi & Tokiko Shimizu & Hideki Takayasu, 2004. "Fractal Network derived from banking transaction -- An analysis of network structures formed by financial institutions --," Bank of Japan Working Paper Series 04-E-4, Bank of Japan.
    2. Soramäki, Kimmo & Bech, Morten L. & Arnold, Jeffrey & Glass, Robert J. & Beyeler, Walter E., 2007. "The topology of interbank payment flows," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 379(1), pages 317-333.
    3. Daron Acemoglu & Asuman Ozdaglar & Alireza Tahbaz-Salehi, 2015. "Systemic Risk and Stability in Financial Networks," American Economic Review, American Economic Association, vol. 105(2), pages 564-608, February.
    4. Falk Bräuning & Falko Fecht, 2017. "Relationship Lending in the Interbank Market and the Price of Liquidity," Review of Finance, European Finance Association, vol. 21(1), pages 33-75.
    5. Franklin Allen & Douglas Gale, 2000. "Financial Contagion," Journal of Political Economy, University of Chicago Press, vol. 108(1), pages 1-33, February.
    6. Ronald Heijmans & Richard Heuver, 2011. "Is this bank ill? The diagnosis of doctor TARGET2," DNB Working Papers 316, Netherlands Central Bank, Research Department.
    7. Demiralp, Selva & Preslopsky, Brian & Whitesell, William, 2006. "Overnight interbank loan markets," Journal of Economics and Business, Elsevier, vol. 58(1), pages 67-83.
    8. Iori, Giulia & De Masi, Giulia & Precup, Ovidiu Vasile & Gabbi, Giampaolo & Caldarelli, Guido, 2008. "A network analysis of the Italian overnight money market," Journal of Economic Dynamics and Control, Elsevier, vol. 32(1), pages 259-278, January.
    9. Martinez-Jaramillo, Serafin & Alexandrova-Kabadjova, Biliana & Bravo-Benitez, Bernardo & Solórzano-Margain, Juan Pablo, 2014. "An empirical study of the Mexican banking system’s network and its implications for systemic risk," Journal of Economic Dynamics and Control, Elsevier, vol. 40(C), pages 242-265.
    10. Carla Soares & Ana Sofia Saldanha, 2015. "The Portuguese money market throughout the crisis: What was the impact of ECB liquidity provision?," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.
    11. Ágnes Lublóy, 2006. "Topology of the Hungarian large-value transfer system," MNB Occasional Papers 2006/57, Magyar Nemzeti Bank (Central Bank of Hungary).
    12. Hallissey, Niamh, 2016. "Interconnectedness of the Irish banking sector with the global financial system," Quarterly Bulletin Articles, Central Bank of Ireland, pages 66-82, January.
    13. Leo Katz, 1953. "A new status index derived from sociometric analysis," Psychometrika, Springer;The Psychometric Society, vol. 18(1), pages 39-43, March.
    14. Michael Boss & Helmut Elsinger & Martin Summer & Stefan Thurner, 2004. "Network topology of the interbank market," Quantitative Finance, Taylor & Francis Journals, vol. 4(6), pages 677-684.
    15. Kirsten Bonde Rørdam & Morten Linnemann Bech, 2008. "The Topology of Danish Interbank Money Flows," FRU Working Papers 2009/01, University of Copenhagen. Department of Economics. Finance Research Unit.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Fasianos, Apostolos & Lydon, Reamonn & McIndoe-Calder, Tara, 2017. "The Balancing Act: Household Indebtedness Over the Lifecycle," Quarterly Bulletin Articles, Central Bank of Ireland, pages 46-61, April.
    2. Downey, Claire & Lyons, Paul & O'Malley, Terry, 2017. "Monitoring Ireland’s Payments using TARGET2," Quarterly Bulletin Articles, Central Bank of Ireland, pages 81-95, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Downey, Claire & Lyons, Paul & O'Malley, Terry, 2017. "Monitoring Ireland’s Payments using TARGET2," Quarterly Bulletin Articles, Central Bank of Ireland, pages 81-95, April.
    2. Fasianos, Apostolos & Lydon, Reamonn & McIndoe-Calder, Tara, 2017. "The Balancing Act: Household Indebtedness Over the Lifecycle," Quarterly Bulletin Articles, Central Bank of Ireland, pages 46-61, April.
    3. Bech, Morten L. & Atalay, Enghin, 2010. "The topology of the federal funds market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(22), pages 5223-5246.
    4. Elosegui, Pedro & Forte, Federico D. & Montes-Rojas, Gabriel, 2022. "Network structure and fragmentation of the Argentinean interbank markets," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 3(3).
    5. Affinito, Massimiliano & Franco Pozzolo, Alberto, 2017. "The interbank network across the global financial crisis: Evidence from Italy," Journal of Banking & Finance, Elsevier, vol. 80(C), pages 90-107.
    6. Accominotti, Olivier & Lucena-Piquero, Delio & Ugolini, Stefano, 2023. "Intermediaries’ substitutability and financial network resilience: A hyperstructure approach," Journal of Economic Dynamics and Control, Elsevier, vol. 153(C).
    7. Sam Langfield & Kimmo Soramäki, 2016. "Interbank Exposure Networks," Computational Economics, Springer;Society for Computational Economics, vol. 47(1), pages 3-17, January.
    8. Paul Glasserman & Peyton Young, 2015. "Contagion in Financial Networks," Economics Series Working Papers 764, University of Oxford, Department of Economics.
    9. I�aki Aldasoro & Ignazio Angeloni, 2015. "Input-output-based measures of systemic importance," Quantitative Finance, Taylor & Francis Journals, vol. 15(4), pages 589-606, April.
    10. Blasques, Francisco & Bräuning, Falk & Lelyveld, Iman van, 2018. "A dynamic network model of the unsecured interbank lending market," Journal of Economic Dynamics and Control, Elsevier, vol. 90(C), pages 310-342.
    11. Ozili, Peterson K, 2017. "Earnings Management in Interconnected Networks: A Perspective," MPRA Paper 92647, University Library of Munich, Germany.
    12. Marco Bardoscia & Paolo Barucca & Stefano Battiston & Fabio Caccioli & Giulio Cimini & Diego Garlaschelli & Fabio Saracco & Tiziano Squartini & Guido Caldarelli, 2021. "The Physics of Financial Networks," Papers 2103.05623, arXiv.org.
    13. Montagna, Mattia & Lux, Thomas, 2014. "Contagion risk in the interbank market: A probabilistic approach to cope with incomplete structural information," Kiel Working Papers 1937, Kiel Institute for the World Economy (IfW Kiel).
    14. Temizsoy, Asena & Iori, Giulia & Montes-Rojas, Gabriel, 2017. "Network centrality and funding rates in the e-MID interbank market," Journal of Financial Stability, Elsevier, vol. 33(C), pages 346-365.
    15. Liu, Anqi & Paddrik, Mark & Yang, Steve Y. & Zhang, Xingjia, 2020. "Interbank contagion: An agent-based model approach to endogenously formed networks," Journal of Banking & Finance, Elsevier, vol. 112(C).
    16. Green, Christopher & Bai, Ye & Murinde, Victor & Ngoka, Kethi & Maana, Isaya & Tiriongo, Samuel, 2016. "Overnight interbank markets and the determination of the interbank rate: A selective survey," International Review of Financial Analysis, Elsevier, vol. 44(C), pages 149-161.
    17. Fabio Caccioli & Paolo Barucca & Teruyoshi Kobayashi, 2018. "Network models of financial systemic risk: a review," Journal of Computational Social Science, Springer, vol. 1(1), pages 81-114, January.
    18. Rainone, Edoardo, 2020. "The network nature of over-the-counter interest rates," Journal of Financial Markets, Elsevier, vol. 47(C).
    19. Berndsen, Ron J. & León, Carlos & Renneboog, Luc, 2018. "Financial stability in networks of financial institutions and market infrastructures," Journal of Financial Stability, Elsevier, vol. 35(C), pages 120-135.
    20. repec:zbw:bofrdp:2013_019 is not listed on IDEAS
    21. Blasques, Francisco & Bräuning, Falk & Lelyveld, Iman van, 2018. "A dynamic network model of the unsecured interbank lending market," Journal of Economic Dynamics and Control, Elsevier, vol. 90(C), pages 310-342.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cbi:qtbart:y:2017:m:04:p:62-80. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Fiona Farrelly (email available below). General contact details of provider: https://edirc.repec.org/data/cbigvie.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.