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Abstract

We study the Chinese experience and provide evidence that central banks can play an active role in safeguarding financial stability. The narrative approach is used to disentangle macropudential policy actions from monetary actions. We show that reserve requirements, window guidance, supervisory pressure and housing-market policies can be used for macroprudential purposes. Our VAR estimates suggest that well-targeted macroprudential policy has immediate and persistent impact on credit, but no statistically significant impact on output. Macroprudential policy can be used to retain financial stability without triggering an economic slowdown, or as a complement to monetary policy to offset the buildup of financial vulnerabilities arising from monetary easing. A well-designed mix of these two policies helps to achieve both macroeconomic and financial stability objectives, which, however, requires central banks to maintain a multi-instrument framework

Abstract

This study examines how household financial risk tolerance is affected during the period of 2007 and 2009, which covered the eve and through of the financial crisis in the United States and what types of households are associated with the change of risk tolerance. Risk tolerance is measured bz two objective indicators, narrowlz and broadlz defined stock ownership, and a subjective indicator, risk taking attitude. Using panel data from 2007 to 2009 Survez of Consumer Finances, results show that during the financial crisis, the households in general are more risk averse, indicated by withdrawing from stock markets and holding a less risk taking attitude. In addition, Black and Hispanic households are more likely and households with higher education are less likely to withdraw from stock markets. Older households are less likely to change in risk tolerance during the financial crisis, as are richer households. The findings show panel data could generate novel results and contribute to the literature of financial risk tolerance.