AØKK08397U Macroprudential policy and systemic financial risks (F)

Volume 2019/2020

MSc programme in Economics – elective course
The course is part of the Financial line at the MSc programme in Economics,   symbolized by ‘F’.


The aim of this course is to provide a broad understanding of systemic financial risks and macroprudential policy.


Macroprudential policy – i.e. financial regulation that aims to mitigate risks to the financial system as a whole – has gained prominence after the global financial crisis in the 00's. This course will give students the foundation to assess how this new policy field may contribute to robust economic growth.


As an introduction, we examine the theoretical and empirical justification for macroprudential policy focusing on the role of externalities and the costs of financial crises. Here we also discuss the role of banks in society and introduce how and why they are regulated.


Then we examine the macroprudential toolbox:

  • What are the tools and their transmission mechanisms?
  • When should the different tools be applied?
  • How should they be calibrated?
  • And what methods can be used to quantify their effects?

In this part of the course we will cover a variety of different approaches to identify and measure systemic risks, which should be countered by macroprudential policies.


Subsequently, we end the course by focusing on broader policy perspectives; we examine how financial conditions and macroprudential measures can be linked to risks for the economy, we study how different countries have set up their decision making frameworks for macroprudential policy and we discuss how macroprudential policy interacts with other policy areas such as microprudential policies and monetary and fiscal policy.


Throughout the course, we have references to academic studies as well as real-life applications in various countries. Also, as macroprudential policy is a new policy field the unanswered questions are many and during the course we will point to questions that may be explored further in a master thesis. Through spreadsheet exercises the students will learn how to quantify the effects of macroprudential measures on a bank's balance sheet. Also, the students will learn to understand and apply different empirical strategies that can quantify the relationship between financial conditions and the future state of the real economy.

Learning Outcome

After completing the course the student is expected to be able to:



  • Account for the theoretical and empirical justification for macroprudential policy and for the concept of tail risks.
  • Reflect on the main macroprudential tools and their transmission mechanisms
  • Define how macroprudential policy relates to other policy arears.



  • Master the concepts, methods, tools and models learned during the course.
  • Assess and choose relevant indicators, methods and models to analyze the need for the implementation of various macroprudential tools.
  • Discuss the costs and benefits of various macroprudential measures.



  • Implement measures of systemic risks that may guide the use of macroprudential policy.
  • Undertake an analysis of the need for macroprudential policy in a complex situation.  
  • Plan how the effects of different macroprudential measures may be quantified.


The course material will consist primarily of journal articles. In addition, the course will build on material from international organizations working on macroprudential policy e.g. the European Systemic Risk Council, the International Monetary Fund and the Basel Committee on Banking Supervision.


A tentative and non-exhaustive list of papers on the topics covered in the course is given below, but a final reading list will be made available in Absalon as the course progresses.

  • Hanson, Samuel G., Anil K. Kashyap, and Jeremy C. Stein, 2011. "A Macroprudential Approach to Financial Regulation" Journal of Economic Perspectives, 25 (1): 3-28.
  • Borio, C. 2018, "Moving Forward with Macroprudential Frameworks” BIS Annual Economic Report, 2018, Chapter 4.
  • De Nicolo, Gianni, Giovanni Favara and Lev Ratnovski. 2014 "Externalities and Macroprudential Policy" Journal of Financial Perspectives, 2(1)
  • Borio, C. 2014 "The financial cycle and macroeconomics: What have we learnt?" Journal of Banking & Finance 45, 182-198.
  • Greenwood, R., A. Landier and D. Thesmar, 2015, "Vulnerable Banks", Journal of Financial Economics, 115, 471-485.
  • Committee on the Global Financial System, 2012, "Operationalising the selection and application of macroprudential instruments", CGFS Papers, No 48
  • Detken C, et al., 2014, "Operationalizing the countercyclical capital buffer: indicator selection, threshold identification and calibration options", European Systemic Risk Board, Occasional Papers, No. 5.
  • Acharya, Viral V. et al., 2019, "The Anatomy of the Transmission of Macroprudential Policies"  Available at SSRN: https:/​/​ssrn.com/​abstract=3388963
  • Poghosyan, T. 2019, "How Effective is Macroprudential Policy? Evidence from Lending Restriction Measures in EU Countries", IMF Working Papers,  No. 19/45
  • Dent, K., B. Westwood,  M. Segoviano. 2016. "Stress testing of banks: an introduction," Bank of England Quarterly Bulletin, Bank of England, vol. 56(3), pages 130-143.
  • Adrian, T. et al. 2019, Vulnerable Growth, American Economic Review, 109 (4)
It is recommended to have followed Macroeconomics III before or at the same time as the course.

Students that do not have taken Econometrics II at the Bachelor study of Economics at Copenhagen University must have taken a similar course before attending "Macroprudential policy and systemic financial risks".
Lectures. Parts of some lectures will constitute a run through of relevant exercises. In addition, some lectures will take the form of computer sessions where students are asked to bring their laptop, download some codes and/or data, and solve various exercises under supervision. The lectures and exercises will be given by economists from the Danish Central Bank working on macroprudential policy issues.
2 hours lectures 1 to 2 times a week from week 6 to 20 (except holidays).

The overall schema for the Master can be seen at KUnet:
MSc in Economics => "courses and teaching" => "Planning and overview" => "Your timetable"
KA i Økonomi => "Kurser og undervisning" => "Planlægning og overblik" => "Dit skema"

Timetable and venue:
To see the time and location of lectures please press the link under "Se skema" (See schedule) at the right side of this page (F means Spring).

You can find the similar information in English at
-Select Department: “2200-Økonomisk Institut” (and wait for respond)
-Select Module:: “2200-F20; [Name of course]”
-Select Report Type: “List – Weekdays”
-Select Period: “Forår/Spring – Week 5-30”
Press: “ View Timetable”
  • Category
  • Hours
  • Exam
  • 12
  • Lectures
  • 42
  • Preparation
  • 152
  • Total
  • 206

The students receive:
- Individual feedback on solving exercises.
- Collective feedback from quizzes during the lectures.

7,5 ECTS
Type of assessment
Written assignment, 12 hours
individual take-home exam.
The exam assignment is given in English and must be answered in English.
The students are allowed to communicate about the given problem-set but must work on, write and upload the assignment answer individually. The plagiarism rules must be complied.
Exam registration requirements

There are no requirements that the student has to fulfill during the course to be able to sit the exam.


All aids allowed
Marking scale
7-point grading scale
Censorship form
No external censorship
for the written exam. The exam may be chosen for external censorship by random check.
Exam period

The exam takes place:

June 17, 2020 from 10 AM to 10 PM


Exam information:

In special cases, the exam date can be changed to another day and time within the exam period.


Information about the exam will be available in  the Digital Exam  from the middle of the semester.


For enrolled students more information about examination, rules etc. is available at  Master students (UK) and Master students (DK).



The reexam takes place:

August 31, 2020 from 10 AM to 10 PM


NOTE: If only few students register for the written re-exam, the re-exam might change to a 20 minutes oral examination without preparation. Aids are allowed at the examination. If changed to an oral re-exam, the exam date, time and place might change as well. The Examination's Office then inform the students by KU e-mail.


Reexam info:

Info is available in Digital Exam early August.

More info at Master(UK), Master(DK) and Bachelor(DK).

Criteria for exam assesment

Students are assessed on the extent to which they master the learning outcome for the course.


To receive the top grade, the student must with no or only a few minor weaknesses be able to demonstrate an excellent performance displaying a high level of command of all aspects of the relevant material and can make use of the knowledge, skills and competencies listed in the learning outcomes.