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This paper gauges if, and how, institutional arrangements are correlated with the use of macroprudential policy instruments. Using data from 39 countries, the paper evaluates policy response time in various types of institutional arrangements for macroprudential policy and finds that the macroprudential framework that gives the central bank an important role is associated with more timely use of macroprudential policy instruments. Policymakers may also tend to use macroprudential instruments more quickly if the ability to conduct monetary policy is somehow constrained. This finding points to the importance of coordination between macroprudential and monetary policy.

This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. This paper develops a comprehensive new framework to measure and analyze sovereign risk. Since traditional macroeconomic vulnerability indicators and accounting-based measures do not address risk in a comprehensive and forward-looking way, the contingent claims approach is used to construct a marked-to-market balance sheet for the sovereign, and derive a set of credit-risk indicators that serve as a barometer of sovereign risk. Applications to 12 emerging market economies show the risk indicators to be robust and highly correlated with market spreads. The framework can help policymakers design risk mitigation strategies and rank policy options using a calibrated structural model unique to each economy.

This paper develops a comprehensive new framework to measure and analyze sovereign risk. Contingent claims analysis is used to construct a marked-to-market balance sheet for the sovereign and derive a set of forward-looking credit risk indicators that serve as a barometer of sovereign risk. Applications to 12 emerging market economies show the approach to be robust, and the risk indicators are a significant improvement over traditional macroeconomic vulnerability indicators and accounting-based measures. The framework can help policymakers design risk mitigation strategies and rank policy options using a calibrated structural model unique to each economy. IMF Staff Papers (2008) 55, 109–148; doi:10.1057/palgrave.imfsp.9450026; published online 22 January 2008

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