Eurozone's macroprudential policy and financial stability

Abstract

Macroprudential policy gained attention after the 2010 European sovereign debt crisis. The increasingly globalized world poses systemic risk to economic activity and, in the European context, tailoring policies to diverse economies while achieving stability is a challenging task. The literature lacks conclusive evidence on the stability and impact of macroprudential policy, especially in light of recent events like the Covid-19 pandemic and the Ukraine conflict. Additionally, the rise of shadow banking underscores the importance of such policies in the Euro Zone. Current regulations do not guarantee financial system stability, but increased regulation following the debt crisis, and stable financial stress indicators indicate macroeconomic stability.