The recent financial crisis has highlighted the need to go beyond a purely micro approach to financial regulation and supervision. In recent months, the number of policy speeches, research papers and conferences that discuss a macro perspective on financial regulation has grown considerably. The policy debate is focusing in particular on macroprudential tools and their usage, their relationship with monetary policy, their implementation and their effectiveness. Macroprudential policy has recently also attracted considerable attention among researchers. This paper provides an overview of research on this topic. We also identify important future research questions that emerge from both the literature and the current policy debate.JEL classification: E58, G28.Key words: Macroprudential policy. 1The views expressed are those of the authors and should not be taken to reflect those of the BIS or De Nederlandsche Bank. We would like to thank Itai Agur, Bill Allen, Claudio Borio, Maria Demertzis, Marvin Goodfriend, Pierre Lafourcade, Iman van Lelyveld, Kasper Roszbach, Philip Turner and Haibin Zhu for helpful comments and discussions, and Bruce Bowlin for excellent research assistance. The authors' email addresses are e.b.g.galati@dnb.nl and richhild.moessner@bis.org.

We survey the literature on the efficacy of foreign exchange market intervention in emerging market countries, emphasising the differences with the literature on industrial countries. We then use official statistics on central bank intervention by the Czech National Bank in conjunction with options market data to study the impact of intervention during 2001e2002. We find that central bank intervention had some (weakly) statistically significant impact on the spot rate and the risk reversal but that this impact was small. We do not find evidence that intervention had an influence on short-term exchange rate volatility. We also find that, in our sample period, Czech authorities appeared to intervene mainly in response to an acceleration of the speed of koruna appreciation.

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The literature on the effectiveness of macroprudential policy tools is still in its infancy and has so far provided only limited guidance for policy decisions. In recent years, however, increasing efforts have been made to fill this gap. Progress has been made in embedding macroprudential policy in theoretical models. There is increasing empirical work on the effect of some macroprudential tools on a range of target variables, such as quantities and prices of credit, asset prices, and on the amplitude of the financial cycle and financial stability. In this paper we provide a critical review of recent progress in theoretical and empirical research on the effectiveness of macroprudential instruments.

BIS Working Papers are written by members of the Monetary and Economic Department of the Bank for International Settlements, and from time to time by other economists, and are published by the Bank. The papers are on subjects of topical interest and are technical in character. The views expressed in them are those of their authors and not necessarily the views of the BIS.