THE ROLE OF MACROPRUDENTIAL MEASURES IN TERMS OF GLOBAL ECONOMIC CRISES – THE CASE OF THE REPUBLIC OF MACEDONIA

Abstract

The global financial and economic crisis has revealed the lack of an analytical framework that can help in predicting and dealing with growing global financial imbalances, which can cause serious macroeconomic consequences. If we make a general retrospective of the global crisis, we will determine the fundamental shortcomings in understanding the systematic risk - in fact it is a failure to assess how the aggressive risk taking by various types of financial institutions was the reason for the huge growth in the balance in the entire financial system. Excessive confidence in the ability of self-adjustment of the financial system led to an underestimation of the rising values of debt and leverage, as a result of the credit boom and the increase in the prices of assets. In addition there was an insufficient appreciation of the role of financial innovation and the financial regulation in increasing financial imbalances and the consequences of the real economy. The global crisis was the reason for the revision of the broad policy instruments and measures. In this respect, today's crisis pointed the need to overcome the purely micro-founded approach to financial regulation and supervision and to attract particular attention to the defining of the development of macroeconomic policy elements for financial stability. Policy makers came to a consensus that the purpose of the macroprudential policy is a reduction of the systematic risk, strengthening the ability of the financial system to cope with shocks and a strong support for stable financial system functioning, without the enormous support during the crisis. This paper will be focused on several key issues concerning macroprudential policy: defining the goals of macroprudential policies after the global financial shock; overview of the use of macruprudential measures during the crisis; analysis of the implementation and efficiency of macruprudential measures during the crisis; reasons for cooperation with monetary policy; analysis of the above mentioned issues on the case of the Republic of Macedonia, having in mind the country specific characteristics – small and open economy extremely vulnerable to global imbalances, fixed exchange rate regime.