makroprudence

Makroprudence, also known as macroprudence, is a concept in economics and financial regulation that focuses on the prudent management of the economy and financial system as a whole. It emphasizes the importance of stability, sustainability, and resilience in the long term. The term was popularized by the Basel Committee on Banking Supervision in the context of banking regulation, but its principles can be applied more broadly to economic policy and governance.

The core principles of makroprudence include:

1. Risk management: Makroprudence advocates for a comprehensive approach to risk management that considers both microeconomic and macroeconomic risks. This includes identifying, measuring, and mitigating risks that could have significant impacts on the economy.

2. Stability: The goal of makroprudence is to promote economic stability by preventing or mitigating financial crises and other shocks that could disrupt the economy. This involves maintaining a healthy balance between growth and stability, and ensuring that the financial system is robust and resilient.

3. Sustainability: Makroprudence also considers the long-term sustainability of the economy and financial system. This includes promoting economic growth that is inclusive and environmentally sustainable, as well as ensuring that the financial system is well-capitalized and able to withstand future shocks.

4. Coordination: Effective makroprudence requires coordination and cooperation among different stakeholders, including governments, central banks, financial regulators, and the private sector. This involves sharing information, coordinating policies, and working together to address common challenges.

Makroprudence is an evolving concept, and its principles are subject to ongoing debate and refinement. However, it is widely recognized as an important approach to promoting economic stability, sustainability, and resilience in the long term.