Macro-prudential authorities must take account of the “fiscal footprint” of their policies or risk making crises worse, a working paper published by the Deutsche Bundesbank argues.

In The fiscal footprint of macroprudential policy, Ricardo Reis focuses on regulatory policies that affect the share of government bonds held by banks. He uses the term βt to denote this share.

Many macro-prudential policies affect βt, Reis argues, calling it “central to the fiscal footprint of these policies”. βt