Economics · Macroprudential Policy

Choose the most logical order of sentences from among the given choices to construct a coherent paragraph. 1. However, a major weakness lies in regulatory arbitrage, where financial institutions shift activities to less regulated sectors to avoid new constraints. 2. Macroprudential policies are regulatory tools designed to mitigate systemic risk across the financial sector rather than manage inflation. 3. Furthermore, measuring the true impact of these policies remains difficult due to the challenge of establishing counterfactual scenarios in complex global markets. 4. One key advantage is their surgical targeting of specific vulnerabilities, such as excessive leverage in the housing market.