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Federal Reserve Bank of Cleveland
Working Papers
Macroprudential Policy: Results from a Tabletop Exercise
Denise Duffy
Joseph G. Haubrich
Anna Kovner
Alex Musatov
Edward Simpson Prescott
Richard J. Rosen
Thomas D. Tallarini
Alexandros Vardoulakis
Emily Yang
Andrei Zlate
Abstract

This paper presents a tabletop exercise designed to analyze macroprudential policy. Several senior Federal Reserve officials were presented with a hypothetical economy as of 2020:Q2 in which commercial real estate and nonfinancial debt valuations were very high. After analyzing the economy and discussing the use of monetary and macroprudential policy tools, participants were then presented with a hypothetical negative shock to commercial real estate valuations that occurred in the second half of 2020. Participants then discussed the use of the tools during an incipient downturn. Some of the findings of the exercise were that during an asset boom, there were limits to the effectiveness of US macroprudential tools in controlling narrow risks and that changes to the fed funds rate may not always simultaneously meet macroeconomic and financial stability goals. Some other findings were that during a downturn, it would be desirable to use high-frequency indicators for deciding when to release the countercyclical capital buffer (CCyB) and that tensions exist between microprudential and macroprudential goals when using the CCyB and the stress test.


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Denise Duffy & Joseph G. Haubrich & Anna Kovner & Alex Musatov & Edward Simpson Prescott & Richard J. Rosen & Thomas D. Tallarini & Alexandros Vardoulakis & Emily Yang & Andrei Zlate, Macroprudential Policy: Results from a Tabletop Exercise, Federal Reserve Bank of Cleveland, Working Papers 191100, 21 May 2019.
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Keywords: financial stability; macroprudential policy; monetary policy; tabletop exercise
DOI: 10.26509/frbc-wp-201911
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