Stanley Fischer: The great recession - moving ahead
Speech by Mr Stanley Fischer, Vice-Chairman, Board of Governors of the Federal Reserve
System, at "The Great Recession - Moving Ahead", a conference sponsored by the Swedish
Ministry of Finance, Stockholm, 11 August 2014.
* * *
The original speech can be watched live on the Board of Governors of the Federal Reserve System's website.
I am grateful to Andrea Raffo, Stacey Tevlin, and Beth Anne Wilson for their assistance.
The recession that began in the United States in December 2007 ended in June 2009. But
the Great Recession is a near-worldwide phenomenon, with the consequences of which
many advanced economies - among them Sweden - continue to struggle. Its depth and
breadth appear to have changed the economic environment in many ways and to have left
the road ahead unclear.
Today I will discuss three key aspects of the challenges policymakers face as they seek to
move ahead. These are: (1) The impact of the Great Recession and the associated Global
Financial Crisis on the growth of output, both in the short term and over the longer term.
(2) The reform of the financial sector - in other words, how much progress have we made in
creating a safer and more stable post-crisis financial environment? (3) The impact of the
crisis on the conduct of monetary policy - in particular, how to balance the goals of achieving
stable inflation and full employment while also taking into account the need to maintain
financial stability. I will leave it to others to address the important challenges facing fiscal
policymakers as they determine the appropriate roles and paths for fiscal policy at both the
macro- and micro-levels.
To keep the focus sharp, I will deal primarily with the economy of the United States. But
policymakers around the world confront related challenges and I will draw also on the
postcrisis experiences of other economies. And I should make it clear that my comments today
are mine alone and do not necessarily represent the views of other members of the Board of
Governors of the Federal Reserve System or the Federal Open Market Committee.
Challenges arising from the growth slowdown
I begin by reviewing recent global economic developments and the questions they raise
about where we are likely to go from here. There has been a steady, if unspectacular, climb
in global growth since the financial crisis. For example, based on recent IMF data from the
World Economic Outlook, which uses purchasing power parity weights, world growth
averaged 3percent during the first four years of the recovery and as of July was expected to
be 3.4 percent this year.1
The IMF expects global growth to reach 4 percent next year - a
rate about equal to its estimate for long-run growth. This global average reflects a forecast of
steady improvement in the performance of output in the advanced economies where growth
averaged less than 1percent during the initial phase of the recovery to an expected
2-1/2 percent by 2015. In contrast, the recovery in the emerging market economies started
strong but has since fallen off, in part, as fiscal policy stimulus has been pared back.
But - and this is no small "but" - the global recovery has been disappointing. With few
exceptions, growth in the advanced economies has underperformed expectations of growth
as economies exited from recession. Year after year we have had to explain from mid-year
on why the global growth rate has been lower than predicted as little as two quarters back.
Indeed, research done by my colleagues at the Federal Reserve comparing previous cases
of severe recessions suggests that, even conditional on the depth and duration of the Great
Recession and its association with a banking and financial crisis, the recoveries in the
advanced economies have been well below average.2 In the emerging market economies,
the initial recovery was more in line with historical experience, but recently the pace of
growth has been disappointing in those economies as well. This slowing is broad based -
with performance in Emerging Asia, importantly China, stepping down sharply from the
postcrisis surge, to rates significantly below the average pace in the decade before the crisis. A
similar step-down has been seen recently for other regions including Latin America.
These disappointments in output performance have not only led to repeated downward
revisions of forecasts for short-term growth, but also to a general reassessment of longer-run
growth. From the perspective of the FOMC, even in the heart of the crisis, in January 2009,
the central tendency of the Committee members' projections for longer-run U.S. growth was
between 2-1/2and 3 percent. At our June meeting this year, these projections had fallen to
between roughly 2 and 2-1/4 percent. This downward revision is not unique to our institution
or to the United States. Indeed, the IMF's expectation for long-run global growth is now a full
percentage point below what it was immediately before the Global Financial Crisis.3 This
reconsideration reflects lower projected growth for both the advanced and the emerging
market economies.
This pattern of disappointment and downward revision sets up the first, and the basic,
challenge on the list of issues policymakers face in moving ahead: restoring growth, if that is
possible. In some respects, we should not have been surprised at the prolonged hit to output
growth following the global financial crisis. As Cerra and Saxena and Reinhart and Rogoff,
among others, have documented, it takes a long time for output in the wake of banking and
financial crises to return to pre-crisis levels.4 Possibly we are simply seeing a prolonged
Reinhart-Rogoff cyclical episode, typical of the aftermath of deep financial crises, and
compounded by other temporary headwinds. But it is also possible that the
underperformance reflects a more structural, longer-term, shift in the global economy, with
less growth in underlying supply factors.
Separating out the cyclical from the structural, the temporary from the permanent, impacts of
the Great Recession and its aftermath on the macroeconomy is necessary to assessing and
calibrating appropriate policies going forward. The difficulty in disentangling demand and
supply factors makes the job of the monetary policymaker especially hard since it
complicates the assessment of the amount of slack, or underutilized productive capacity, in
the economy. Over the longer term it will be possible to disentangle the amount of slack on
the basis of the behavior of prices and wages as the levels of resource utilization in
economies rise, but it would be better to understand why growth has been so slow without
experiencing either a runup in inflation or a descent into deflation.
2
See Greg Howard, Robert Martin, and Beth Anne Wilson (2011), "Are Recoveries from Banking and Financial
Crises Really So Different?" International Finance Discussion Papers 1037 (Washington: Board of Governors
of the Federal Reserve System, November).
3
This calculation compares the IMF WEO's forecast for global growth 5 years ahead from the April 2008 WEO
to the WEO July 2014 forecast.
4
See Carmen M. Reinhart and Kenneth S. Rogoff (2009), This Time Is Different: Eight Centuries of Financial
Folly (Princeton: Princeton University Press); Moritz Schularick and Alan M. Taylor (2012), "Credit Booms
Gone Bust: Monetary Policy, Leverage Cycles, and Financial Crises, 1870-208", American Economic Review,
vol. 102 (April), pp. 1029-61; Valerie Cerra and Sweta Chaman Saxena (2008), "Growth Dynamics: The Myth
of Economic Recovery", American Economic Review, vol. 98 (March), pp. 439-57; and Michael D. Bordo and
Joseph G. Haubrich (2012), "Deep Recessions, Fast Recoveries, and Financial Crises: Evidence from the
American Record (PDF)", Working Paper 12-14 (Cleveland: Federal Reserve Bank of Cleveland, June).
In the United States, three major aggregate demand headwinds appear to have kept a more
vigorous recovery from taking hold. The unusual weakness of the housing sector during the
recovery period, the significant drag - now waning - from fiscal policy, and the negative
impact from the growth slowdown abroad - particularly in Europe - are all prominent factors
that have constrained the pace of economic activity.
The housing sector was at the epicenter of the U.S. financial crisis and recession and it
continues to weigh on the recovery. After previous recessions, vigorous rebounds in housing
activity have typically helped spur recoveries. In this episode, however, residential
construction was held back by a large inventory of foreclosed and distressed properties and
by tight credit conditions for construction loans and mortgages. Moreover, the wealth effect
from the decline in housing prices, as well as the inability of many underwater households to
take advantage of low interest rates to refinance their mortgages, may have reduced
household demand for non-housing goods and services. Indeed, some researchers have
argued that the failure to deal decisively with the housing problem seriously prolonged and
deepened the crisis.5 Growth in other countries that experienced financial crises, including
the United Kingdom, Ireland, and Spain, has been weighted down by struggling residential
sectors. More recently, many of these factors have abated in the United States and yet, after
encouraging signs of improvement in 2012 and in early 2013, over the past year the growth
of residential construction has faltered and home sales have fallen off. The sharp rise in
mortgage interest rates in mid-2013 likely contributed to this setback.
The stance of U.S. fiscal policy in recent years constituted a significant drag on growth as the
large budget deficit was reduced. Historically, fiscal policy has been a support during both
recessions and recoveries. In part, this reflects the operation of automatic stabilizers, such as
declines in tax revenues and increases in unemployment benefits, that tend to accompany a
downturn in activity. In addition, discretionary fiscal policy actions typically boost growth in
the years just after a recession. In the U.S., as well as in other countries - especially in
Europe - fiscal policy was typically expansionary during the recent recession and early in the
recovery, but discretionary fiscal policy shifted relatively fast from expansionary to
contractionary as the recovery progressed. In the United States, at the federal level, the end
of the payroll tax cut, the sequestration, the squeeze on discretionary spending from budget
caps, and the declines in defense spending have all curtailed economic growth. Last year, for
example, the Congressional Budget Office estimated that fiscal headwinds slowed the pace
of real GDP growth in 2013 by about 1-1/2 percentage points relative to what it would have
been otherwise. Moreover, state and local governments, facing balanced budget
requirements, have responded to the large and sustained decline in their revenues owing to
the deep recession and slow recovery by reducing their purchases of real goods and
services. Job cuts at federal, state, and local governments have reduced payrolls by almost
3/4 of a million workers, resulting in a decline in total government civilian employment of
3-1/4 percent since its peak in early 2009.6 The fiscal adjustments of the last few years have
reduced the federal government deficit to an expected level of 3 percent of GDP in 2014 and
fiscal drag over the next few years is likely to be relatively low.
A third headwind slowing the U.S. recovery has been unexpectedly slow global growth,
which reduced export demand. Over the past several years, a number of our key trading
partners have suffered negative shocks. Some have been relatively short lived, including the
collapse in Japanese growth following the tragic earthquake in 2011. Others look to be more
structural, such as the stepdown in Chinese growth compared to its double digit pre-crisis
pace. Most salient, not least for Sweden, has been the impact of the fiscal and financial
situation in the euro area over the past few years. Weaker economic conditions in Europe
and other parts of the world have weighed on U.S. exports and corporate earnings; added to
the risks that U.S. financial institutions, businesses, and households considered when
making lending and investment decisions; and at times depressed U.S. equity prices.
The housing market, fiscal consolidation, and unexpectedly anemic foreign demand all play a
significant role in explaining the weakness of aggregate demand in the U.S. economy,
weakness that could not have been accurately predicted based on past recession
experiences or by the fact that this recession started with a massive financial crisis. But,
turning to the aggregate supply side, we are also seeing important signs of a slowdown of
growth in the productive capacity of the economy - in the growth in labor supply, capital
investment, and productivity. This may well reflect factors related to or predating the
recession that are also holding down growth.
How much of this weakness on the supply side will turn out to be structural - perhaps
contributing to a secular slowdown - and how much is temporary but
longer-than-usuallasting remains a crucial and open question.
Looking at the aggregate production function, we begin with labor supply. The considerable
slowdown in the growth rate of labor supply observed over the past decade is a source of
concern for the prospects of U.S. output growth. There has been a steady decrease in the
labor force participation rate since 2000. Although this reduction in labor supply largely
reflects demographic factors - such as the aging of the population - participation has fallen
more than many observers expected and the interpretation of these movements remains
subject to considerable uncertainty. For instance, there are good reasons to believe that
some of the surprising weakness in labor force participation reflects still poor cyclical
conditions. Many of those who dropped out of the labor force may be discouraged workers.
Further strengthening of the economy will likely pull some of these workers back into the
labor market, although skills and networks may have depreciated some over the past years.
Another factor that may be contributing to a slowdown in longer-run output growth is a
decline in the rate of investment. As is typical in a downturn, movements in investment were
important to the cyclical swings in the economy during the Great Recession. And, as would
be expected given the depth of the downturn, investment declines were especially large in
this episode. However, in the United States, and in many other countries as well, the growth
rate of the capital stock has yet to bounce back appreciably - despite historically low interest
rates, access to borrowing for most firms, and ample profits and cash - causing concerns
over the long-run prospects for the recovery of investment.
Turning next to productivity growth, Solow's famous result over fifty years ago was that over
eighty percent of growth in output per hour in the period 1909-1949 came from technical
change.7 Between 1964 and 2003 total factor productivity growth in the United States
averaged around 1-1/2 percent, contributing to a 2percent expansion per year in U.S. GDP
per capita. At this rate, American standards of living would double every 35 years.
However, productivity growth in recent years has been disappointing. Over the past decade,
U.S. total factor productivity growth declined to 1percent, which some argue may represent
the real norm for the U.S. economy.8 In this view, the long period of rapid productivity growth
spurred by the technological innovations of the first and second Industrial Revolutions ended
in the 1970s and the economy has continued at a lower productivity growth rate since then,
except for a brief burst in the mid-1990s. In particular, these authors argue that the
information technology (IT) revolution of the past several decades - including the diffusion of
computers, the development of the internet, and improvements in telecommunications - was
an anomaly and is unlikely to generate the productivity gains prompted by earlier innovations
such as electrification and mass production.
Obviously, future productivity growth in the United States and in the world is yet to be
determined. Possibly we are moving into a period of slower productivity growth - but I for one
continue to be amazed at the potential for improving the quality of the lives of most people in
the world that the IT explosion has already revealed. Possibly, productivity could continue to
rise in line with its long-term historical average.9 After all, as the experience of the 1990s
shows, productivity cycles are extremely difficult to predict and, even considering the
slowdown of the past decade, U.S. total factor productivity growth fluctuated around
1-1/2 percent in the postwar period. In addition, the recent weakness could reflect
ReinhartRogoff cyclical factors associated with the financial crisis, and pent up improvements could
be revealed once confidence returns.10 Finally, fears about the end of productivity gains are
based on evidence from the United States and other advanced economies. Globally,
however, there is tremendous scope for productivity gains reflecting technological catch up,
infrastructure investment, and the potential for human capital increases due to improvements
in education and nutrition, and the incorporation and inclusion of women into the labor force.
These gains should benefit not just the emerging market economies but also the rest of world
more generally, including the United States.
At the end of the day, it remains difficult to disentangle the cyclical from the structural
slowdowns in labor force, investment, and productivity. Adding to this uncertainty, as
research done at the Fed and elsewhere highlights, the distinction between cyclical and
structural is not always clear cut and there are real risks that cyclical slumps can become
structural; it may also be possible to reverse or prevent declines from becoming permanent
through expansive macroeconomic policies.11 But three things are for sure: first, the rate of
growth of productivity is critical to the growth of output per capita; second, the rate of growth
of productivity at the frontiers of knowledge is especially difficult to predict; and third, it is
unwise to underestimate human ingenuity.
"Productivity and Potential Output before, during, and after the Great Recession (PDF)", Working Paper Series
2014-15 (San Francisco: Federal Reserve Bank of San Francisco, June).
9
For a fuller discussion, see, for example, Erik Brynjolfsson and Andrew McAfee (2011), Race Against the
Machine: How the Digital Revolution Is Accelerating Innovation, Driving Productivity, and Irreversibly
Transforming Employment and the Economy (Lexington, Mass.: Digital Frontier Press); Erik Brynjolfsson and
Andrew McAfee (2014), The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant
Technologies (New York: W. W. Norton & Company); and Martin Neil Baily, James Manyika, and Shalabh
Gupta (2013), "U.S. Productivity Growth: An Optimistic Perspective", International Productivity Monitor, no. 25
(Spring), pp. 3-12. See also Ben Bernanke (2013), "Economic Prospects for the Long Run", speech delivered
at Bard College at Simon's Rock, Great Barrington, Mass., May 18.
10
Recent work includes Stijn Claessens, M. Ayhan Kose, and Marco E. Terrones, "What Happens during
Recessions, Crunches and Busts? (PDF)" IMF Working Paper WP/08/274 (Washington: International
Monetary Fund, December); Jane Haltmaier (2012), "Do Recessions Affect Potential Output?" International
Finance Discussion Papers 1066 (Washington: Board of Governors of the Federal Reserve System,
December); and Nicholas Oulton and Maria Sebastia-Barriel (2013), "Long and Short-Term Effects of the
Financial Crisis on Labour Productivity, Capital and Output", Working Paper 470 (London: Bank of England,
January).
11
See Dave Reifschneider, William Wascher, and David Wilcox (2013), "Aggregate Supply in the United States:
Recent Developments and Implications for the Conduct of Monetary Policy", Finance and Economics
Discussion Series 2013-77 (Washington: Board of Governors of the Federal Reserve System, November);
and Christopher J. Erceg and Andrew T. Levin, "Labor Force Participation and Monetary Policy in the Wake of
the Great Recession (PDF)", IMF Working Paper WP/13/245 (Washington: International Monetary Fund, July).
The post-crisis regulatory and supervisory environment
The severity of the Great Recession and its ongoing fallout, importantly including its influence
on public opinion, has heightened the focus on the challenge of avoiding another such crisis.
Indeed, financial sector reform proposals by groups such as the Basel Committee on
Banking Supervision, the Financial Stability Board, and the Group of Thirty were circulating
within a few months of the Lehman Brothers' failure. Since then, policymakers, acting in their
own countries and in coordination with others, have enacted financial sector regulatory
reforms on a scale and scope not seen since the Great Depression.
Designing, implementing, and understanding the consequences of these important reforms
are major challenges for policymakers in a post-Global Financial Crisis world. Most of the
initial proposals incorporated some or most of the following goals:
1. To strengthen the stability and robustness of financial firms, "with particular
emphasis on standards for governance, risk management, capital and liquidity";12
2. To strengthen the quality and effectiveness of prudential regulation and supervision,
with higher standards for systemically important firms;
3. To build the capacity for undertaking effective macroprudential regulation and
supervision;
4. To develop suitable resolution regimes for financial institutions;
5. To strengthen the infrastructure of financial markets, including markets for derivative
transactions;
6. To improve compensation practices in financial institutions;
7. To strengthen international coordination of regulation and supervision, particularly
with regard to the regulation and resolution of global systemically important financial
institutions, later known as G-SIFIs;
8. To better monitor risks within the shadow banking system, and find ways of dealing
with them; and
9. To improve the performance of credit rating agencies, which were deeply involved in
the collapse of markets for collateralized and securitized lending instruments,
especially those based on mortgage finance.
More than six years later, policymakers around the globe have made substantial progress in
strengthening the financial system and reducing the probability of future financial crises.
Globally, the minimum tier 1 capital ratio has been increased, and a capital conservation
buffer has been put in place. In addition, a countercyclical capital buffer has been created
that enables regulators to raise risk-based capital requirements when necessary, and a
minimum international leverage ratio has been set. Finally, global systemically important
banks will face a risk-based capital surcharge based on their systemic risk. Global bank
regulators have also developed, for the first time, liquidity regulations designed to improve
the funding durability and overall liquidity resiliency of internationally active banks.
Additional steps have been taken in some countries. For example, in the United States,
capital ratios and liquidity buffers at the largest banks are up considerably, and their reliance
on short-term wholesale funding has declined considerably. Work on the use of the
resolution mechanisms set out in the Dodd-Frank Act, based on the principle of a single point
of entry - though less advanced than the work on capital and liquidity ratios - holds the
promise of making it possible to resolve banks in difficulty at no direct cost to the taxpayer.
As part of this approach, the United States is preparing a proposal to require systemically
important banks to issue bail-inable long-term debt that will enable insolvent banks to
recapitalize themselves in resolution without calling on government funding - this cushion is
known as a "gone concern" buffer.
At the same time, the introduction of macroeconomic supervisory stress tests in the United
States has added a forward-looking approach to assessing capital adequacy, as firms are
required to hold a capital buffer sufficient to withstand a several-year period of severe
economic and financial stress. The stress tests are a very important addition to the toolkit of
supervisors, one that is likely to add significantly to the quality and effectiveness of financial
sector supervision, and one that should spread internationally as a best practice.
Still, more remains to be done. Although the Basel Committee on Banking Supervision and
the FSB reached impressively rapid agreement on needed changes in regulation and
supervision, progress in agreeing on the resolution of G-SIFIs and some other aspects of
international coordination has been slow. It will also be important to ensure that coordination
among different regulators of the financial system is effective and, in particular, will be
effective in the event of a crisis.
In addition, policymakers still have a good deal to learn about how these various reforms will
change financial market structure and functioning, how effective they will be in enhancing
stability, and whether there will be unintended consequences. Among the most important of
the possible unintended consequences is that toughened regulation of banks will move some
financial activity out of the banking system and into the shadow banking system.
In summary, considerable progress has been made in strengthening bank capital and
liquidity; in improving the quality and effectiveness of prudential regulation and supervision;
in developing suitable resolution regimes for financial institutions; and in strengthening the
infrastructure for the clearing and trading of derivative contracts. It is clear that further
progress is needed with respect to goals 6-9, relating respectively to: improving
compensation practices; strengthening international coordination, especially with regard to
the resolution and regulation of G-SIFIs; finding ways of dealing with the shadow banking
system; and improving the quality of credit rating agencies.
That leaves aside the question of the capacity for effective macroprudential supervision, an
issue we will take up as we begin to discuss the optimal conduct of monetary policy in the
wake of the crisis, given the heightened attention of monetary policymakers to the
importance of maintaining financial stability.
Issues facing monetary policymakers in the wake of the crisis and recession
Prior to the global financial crisis, a rough consensus had emerged among academics and
monetary policymakers that best-practice for monetary policy was flexible inflation targeting.
In the U.S., flexible inflation targeting is implied by the dual mandate given to the Fed, under
which monetary policy is required to take into account deviations of both output and inflation
from their target levels. But even in countries where the central bank officially targets only
inflation, monetary policymakers in practice also aim to stabilize the real economy around
some normal level or path.
Much has changed in the world of central banking since the onset of the Great Recession.
With short-term interest rates near zero, many central banks considerably expanded their
balance sheets, for instance through large-scale purchases of assets or significant liquidity
injections. They also engaged in forward guidance to put downward pressure on interest
rates and support aggregate demand.
I consider quantitative easing to have been largely successful, and that data dependent
forward guidance consistent with the central bank's expectations of its future intentions can
also be successful. But the use of these tools - particularly as reflected in the size of central
bank balance sheets - will make the conduct of monetary policy more complicated during the
recovery. In the United States, we have a number of tools to control short-term rates, despite
the large level of reserves in the system. Raising the rate of interest paid on excess reserves
should play a central role in the eventual normalization of short-term interest rates. An
overnight reverse repo facility could also play a useful part in setting a floor under money
market rates. With these and other possible tools, we will be able to raise rates and maintain
them near their targeted level at the appropriate time.
Another important question is whether monetary policymakers should alter their basic
framework of flexible inflation targeting to take financial stability into account. My answer to
that question is that the "flexible" part of flexible inflation targeting should include contributing
to financial stability, provided that it aids in the attainment of the main goals of monetary
policy. The main goals in the United States are those of the dual mandate, maximum
employment and stable prices; in other countries the main goal is stable prices or low
inflation.
What can the central bank do when financial stability is threatened? If it has effective
macroprudential tools at its disposal, it can deploy those. If it does not itself have the
authority to use such tools, it can try to persuade those who do have the tools to use them. If
no such tools are available in the economy, the central bank may have to consider whether
to use monetary policy - that is, the interest rate - to deal with the threat of financial
instability. At the moment in the U.S., though there may be some areas of concern, I do not
think that financial stability concerns warrant deviating from our traditional focus on inflation
and employment.
A decision on whether to use the interest rate to deal with the threat of financial instability is
always likely to be difficult - particularly in a small open economy, where raising the interest
rate is likely to produce an unwanted exchange rate appreciation. So a critical question must
be whether effective macroprudential policies are to be found in the country in question.
I had some experience with these issues while at the Bank of Israel. In Israel, three separate
regulators deal with different aspects of macroprudential policy, but there is no formal
financial stability committee. The Bank of Israel is also the supervisor of banks, so has
considerable power over housing finance, which essentially is available only from the banks.
Starting in 2010, the Bank of Israel adopted several macroprudential measures to address
rapidly rising house prices, including higher capital requirements and provisioning against
mortgages; limits to the share of any housing financing package indexed to the short-term
(central bank) interest rate to one-third of the total loan, with the remainder of the package
having to be linked to either the five-year real or five-year nominal interest rate; and, on
different occasions, limits to the loan-to-value (LTV) and payment-to-income (PTI) ratios.
Additional precautionary measures were also implemented in the supervision of banks.
The success of these policies was mixed. The limit of one-third on the share of any housing
loan indexed to the short rate substantially raised the cost of housing finance and was the
most successful of the measures. Increases in both the LTV and PTI ratios were moderately
successful. Increasing capital charges and risk weights appeared to have little impact in
practice.
This experience led me to three conclusions on the effectiveness of macroprudential policies.
First, we were very cautious in using these new tools because we did not have good
estimates of their strength and effectiveness. Quite possibly, we should have acted more
boldly on several occasions. Second, use of these tools is likely to be unpopular, for housing
is a sensitive topic in almost every country. And third, coordination among different regulators
and authorities can be complicated.
The difficulty of coordinating among different independent regulators makes it likely that the
degree to which macroprudential policies can be successful depends critically on the
institutional setup of financial supervision in each country. Different countries have structured
their macroprudential policymaking institutions in different ways. In the U.K., the Financial
Policy Committee has been set up within the Bank of England, with the power to make
financial policy - including m