What Determines Institutional Arrangements for Macroprudential Policy

We use information on institutional arrangements for macroprudential policy in 66 countries to examine the recent developments in and characteristics on institutional arrangements for macroprudential policy. Then we conduct empirical analyses on drivers behind the choice of institutional arrangements, especially the roles of a central bank and a government. We show that many countries have recently developed their institutional arrangements with respect to the set-up of a mandate for macroprudential policy and a multi-agency communication/coordination framework. In addition, the current arrangements can be largely divided into two types: centralization in the central bank, where the central bank or a committee of the central bank is the sole owner of the macroprudential mandate; and coordination by the government, where the government coordinates views or policies among multiple agencies with the macroprudential mandate as the sole chairperson of the financial stability committee. Our empirical analyses suggest that wide-ranging features including economic and financial characteristics, the exchange rate regime, and the degree of democracy influence the differences in the roles the central bank and the government play in macroprudential policy in each country.