of macroprudential policy is to minimize systemic risk by limiting boom-bust credit cycles. Several new instruments have been developed under the Basel III framework specifically to promote this objective, such as: countercyclical capital requirements and dynamic provisioning to build up capital or liquidity buffers during good times; maximum leverage ratios to capture both on- and off-balance sheet exposures; and capital surcharges on systemically important financial institutions.

Macroprudential instruments have increasingly become an integral part of the toolkit of many central banks and other financial regulators since the crisis. Macroprudential indexes derived from a dataset for 36 advanced economies and 124 EMDEs suggest that all advanced economies, and about 70 percent of EMDEs, have used these instruments to strengthen the resilience of their financial systems (Cerutti, Claessens, and Laeven 2017). EMDEs have more **— —** actively used macroprudential instruments often on an ad- hoc or experimental basis partly reflecting the fact that they are more exposed to volatile capital flows and have less liberalized financial systems (Claessens 2014). These instruments have been used to reduce the growth of credit to nonfinancial corporations and households, and to help restrain asset price inflation, especially in the housing sector (Budnik and Kleibl 2018; Kuttner and Shim 2013, Vandenbussche, Vogel, and Detragiache 2015; Zhang and Zoli 2016).

In ECA, more than four-fifths of EMDEs have increased the use of macroprudential tools, while in SSA the share is only about one-half (Figure 4). The use of different tools has reflected different structural characteristics among countries. ECA has had relatively high financial integration internationally with a large presence of foreign banks slower lending in U.K. banks, and dynamic provisioning has been associated with smoother credit cycles in Spain (Aiyar, Calomiris, and Wieladek 2016; Jiménez et al. 2017). In contrast, foreign exchange and liquidity policies, such as limits on foreign currency loans and foreign exchange countercyclical reserve requirements, have been more often used in EMDEs in efforts to reduce exposures to volatile capital inflows (Figure 4). This is especially the case in ECA, which had been plagued by currency mismatches in the balance sheets of households and firms (Ben Naceur, Hosny, and Hadjian 2019; Fidrmuc, Hake and Stix 2013; Ranciere, Tornell, and Vamvakidis 2010).

China implemented a wide range of macroprudential policies after the global financial crisis (Figure 4). A priority goal was to contain the growth of corporate debt, especially of stateowned enterprises, through limits on the exposures of banks. Other macroprudential measures aimed at curbing real estate speculation through sector-specific lending limits and higher mortgage down payment requirements. In India, macroprudential policy focused on preventing excessive credit growth by increasing the capital that banks are required to hold against riskier loans and increasing the rate at which banks are required to provision against loan losses for specific sectors. Macroprudential measures have also been used in economic downturns; for example, Brazil lowered reserve requirements in 2017 to help counter its protracted economic slowdown.

The experience of the global financial crisis kindled interest in the impact of monetary and fiscal policy on financial stability and, conversely, the impact of prudential decisions on 13