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The fatal flaw in macropru: it ignores political risk

Author

Listed:
  • Danielsson, Jon
  • Macrae, Robert

Abstract

Political risk is a major cause of systemic financial risk. This column argues that both the integrity and the legitimacy of macroprudential policy, or ‘macropru’, depends on political risk being included with other risk factors. Yet it is usually excluded from macropru, and that could be a fatal flaw.

Suggested Citation

  • Danielsson, Jon & Macrae, Robert, 2016. "The fatal flaw in macropru: it ignores political risk," LSE Research Online Documents on Economics 70703, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:70703
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    File URL: http://eprints.lse.ac.uk/70703/
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    Cited by:

    1. Smita Roy Trivedi, 2021. "Political Stability and the Effectiveness of Currency Based Macro Prudential Measures," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 28(2), pages 319-332, June.

    More about this item

    Keywords

    macropru; microprudential risk; systemic risk; monetary policy; regulation;
    All these keywords.

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General

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