Macroprudential Policies Unleash Hidden Consequences: European Central Bank Workshop Reveals Distributional Effects

Macroprudential policy has become a crucial tool for European central banks to maintain financial stability since the global financial crisis. However, new research highlights unintended consequences of these policies on distributional and socio-economic outcomes in non-financial sectors and households.

A workshop held by the 9th Macroprudential Policy Group (MPPG) explored the multifaceted impacts of macroprudential policies. The event brought together academics and policymakers to discuss complex side effects, including the migration of activities from banks to Non-Bank Financial Institutions (NBFIs), potentially leading to structural shifts in financial intermediation.

Researchers presented studies on borrower-based macroprudential limits, inequality, housing markets, and mortgage measures. The findings suggest that these policies may have distributional effects, affecting households and contributing to socio-economic outcomes outside the financial sector.

The workshop aimed to bridge the gap between theory and practice by fostering a discussion among experts on the implications of macroprudential policies for financial stability and other objectives of central banks and supervisory authorities. The event highlighted the need for policymakers to carefully consider the complex side effects of these measures and balance them with economic growth and competitiveness.