Addressing Spillovers From Prolonged U S Monetary Policy Easing

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Addressing Spillovers From Prolonged U S Monetary Policy Easing

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Author : Stephen Cecchetti
language : en
Publisher: International Monetary Fund
Release Date : 2021-07-09

Addressing Spillovers From Prolonged U S Monetary Policy Easing written by Stephen Cecchetti and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021-07-09 with Business & Economics categories.

There is growing recognition that prolonged monetary policy easing of major economies can have extraterritorial spillovers, driving up financial system leverage in other countries. When faced with such a rise of threats to financial stability, what can countries do? Specifically, is there a role for macroprudential tools, capital controls or foreign exchange intervention in safeguarding financial stability from risks arising externally? We examine the efficacy of these policy interventions by exploring whether preemptive or reactive policy interventions can mitigate such risks. Using a sample of 950 bank and nonbank financial firms across 28 non-U.S. economies over the past two decades, we show that if policymakers are able to implement policies prior to an additional consecutive decline in U.S. interest rates, financial institutions do not increase their leverage by as much as they otherwise would. By contrast, it is more difficult to counter the spillovers with reactive policy interventions. In practice, however, policymakers need to remain cautious about the timing of preventative tightening, especially when their economies face large negative shocks such as a pandemic.

Shocks And Capital Flows

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Author : Mr. Gaston Gelos
language : en
Publisher: International Monetary Fund
Release Date : 2023-10-27

Shocks And Capital Flows written by Mr. Gaston Gelos and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2023-10-27 with Business & Economics categories.

The high exposure of open economies to shocks makes them particularly vulnerable to volatile capital flows and advanced economy monetary policy spillovers. How should and do domestic policymakers respond? The traditional answer has been to use flexible exchange rates as a shock absorber. But flexible exchange rates may not offer full insulation when financial markets are imperfect. This book brings together recent empirical studies at the International Monetary Fund (IMF) on the effectiveness of different tools in responding to such shocks. The 18 chapters in this volume provide a rich background to the recently launched Integrated Policy Framework by the IMF. They comprise assessments of countries’ actual use of different tools, as well as in-depth evaluations of their effectiveness and side effects, covering macroprudential policies, monetary policy, foreign-exchange intervention, and capital flow management policies. Many of the studies involve new data and methods to tackle the inherently difficult problems in identifying and comparing the effects of policies under different circumstances. As a result, the volume offers the reader a comprehensive, in-depth coverage of the policy-oriented empirical research that has informed the development of a new way of thinking about open-economy macroeconomics at the IMF.

Does Prolonged Monetary Policy Easing Increase Financial Vulnerability

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Author : Stephen Cecchetti
language : en
Publisher: International Monetary Fund
Release Date : 2017-03-24

Does Prolonged Monetary Policy Easing Increase Financial Vulnerability written by Stephen Cecchetti and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017-03-24 with Business & Economics categories.

Using firm-level data for approximately 1,000 bank and nonbank financial institutions in 22 countries over the past 15 years we study the impact of prolonged monetary policy easing on risk-taking behavior. We find that the leverage ratio, as well as other measures of firm-level vulnerability, increases for banks and nonbanks as domestic monetary policy easing persists. Cross-border effects are also notable. We find effects of roughly similar magnitude on foreign financial sector firms when the U.S. eases policy. Results appear robust to a variety of specifications, and to be non-linear, with risk-taking behavior rising most quickly at the onset of monetary policy easing.

Monetary Policy And The Housing Bubble

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Author :
language : en
Publisher: DIANE Publishing
Release Date :

Monetary Policy And The Housing Bubble written by and has been published by DIANE Publishing this book supported file pdf, txt, epub, kindle and other format this book has been release on with categories.

International Capital Flows

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Author : Martin Feldstein
language : en
Publisher: University of Chicago Press
Release Date : 2007-12-01

International Capital Flows written by Martin Feldstein and has been published by University of Chicago Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007-12-01 with Business & Economics categories.

Recent changes in technology, along with the opening up of many regions previously closed to investment, have led to explosive growth in the international movement of capital. Flows from foreign direct investment and debt and equity financing can bring countries substantial gains by augmenting local savings and by improving technology and incentives. Investing companies acquire market access, lower cost inputs, and opportunities for profitable introductions of production methods in the countries where they invest. But, as was underscored recently by the economic and financial crises in several Asian countries, capital flows can also bring risks. Although there is no simple explanation of the currency crisis in Asia, it is clear that fixed exchange rates and chronic deficits increased the likelihood of a breakdown. Similarly, during the 1970s, the United States and other industrial countries loaned OPEC surpluses to borrowers in Latin America. But when the U.S. Federal Reserve raised interest rates to control soaring inflation, the result was a widespread debt moratorium in Latin America as many countries throughout the region struggled to pay the high interest on their foreign loans. International Capital Flows contains recent work by eminent scholars and practitioners on the experience of capital flows to Latin America, Asia, and eastern Europe. These papers discuss the role of banks, equity markets, and foreign direct investment in international capital flows, and the risks that investors and others face with these transactions. By focusing on capital flows' productivity and determinants, and the policy issues they raise, this collection is a valuable resource for economists, policymakers, and financial market participants.

Opening Up Capital Flows And Financial Sector Dynamics In Low Income Developing Countries

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Author : Sebastian Horn
language : en
Publisher: International Monetary Fund
Release Date : 2021-09-24

Opening Up Capital Flows And Financial Sector Dynamics In Low Income Developing Countries written by Sebastian Horn and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021-09-24 with Business & Economics categories.

Over the past two decades, many low-income developing countries have substantially increased openness towards external financing and have received large capital inflows. Using bank-level micro data, this paper finds that capital inflows have been associated with financial deepening through increases in bank loans, deposits, and wholesale funding. Domestic banks increase loans more than foreign banks. There are only modest signs of a build-up in financial vulnerabilities. Causality is examined through an instrumental variable approach and an augmented inverse-probability weighting estimator. These approaches indicate only limited evidence for global push effects, pointing towards the importance of domestic pull factors.

Confronting South Korea S Next Crisis

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Author : Jaejoon Woo
language : en
Publisher: Oxford University Press
Release Date : 2022

Confronting South Korea S Next Crisis written by Jaejoon Woo and has been published by Oxford University Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2022 with Business & Economics categories.

This book provides a timely and in-depth analysis of South Korea's key current issues and foreseeable challenges of the economy, with a provocative reassessment of its future.

International Macroeconomics In The Wake Of The Global Financial Crisis

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Author : Laurent Ferrara
language : en
Publisher: Springer
Release Date : 2018-06-13

International Macroeconomics In The Wake Of The Global Financial Crisis written by Laurent Ferrara and has been published by Springer this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018-06-13 with Business & Economics categories.

This book collects selected articles addressing several currently debated issues in the field of international macroeconomics. They focus on the role of the central banks in the debate on how to come to terms with the long-term decline in productivity growth, insufficient aggregate demand, high economic uncertainty and growing inequalities following the global financial crisis. Central banks are of considerable importance in this debate since understanding the sluggishness of the recovery process as well as its implications for the natural interest rate are key to assessing output gaps and the monetary policy stance. The authors argue that a more dynamic domestic and external aggregate demand helps to raise the inflation rate, easing the constraint deriving from the zero lower bound and allowing monetary policy to depart from its current ultra-accommodative position. Beyond macroeconomic factors, the book also discusses a supportive financial environment as a precondition for the rebound of global economic activity, stressing that understanding capital flows is a prerequisite for economic-policy decisions.

Spillovers From U S Monetary Policy Normalization On Brazil And Mexico S Sovereign Bond Yields

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Author : Carlos Góes
language : en
Publisher: International Monetary Fund
Release Date : 2017-03-10

Spillovers From U S Monetary Policy Normalization On Brazil And Mexico S Sovereign Bond Yields written by Carlos Góes and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017-03-10 with Business & Economics categories.

This paper examines the transmission of changes in the U.S. monetary policy to localcurrency sovereign bond yields of Brazil and Mexico. Using vector error-correction models, we find that the U.S. 10-year bond yield was a key driver of long-term yields in these countries, and that Brazilian yields were more sensitive to U.S. shocks than Mexican yields during 2010–13. Remarkably, the propagation of shocks from U.S. long-term yields was amplified by changes in the policy rate in Brazil, but not in Mexico. Our counterfactual analysis suggests that yields in both countries temporarily overshot the values predicted by the model in the aftermath of the Fed’s “tapering” announcement in May 2013. This study suggests that emerging markets will need to contend with potential spillovers from shifts in monetary policy expectations in the U.S., which often lead to higher government bond interest rates and bouts of volatility.

Macroeconomic Shocks And Unconventional Monetary Policy

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Author : Naoyuki Yoshino
language : en
Publisher:
Release Date : 2019

Macroeconomic Shocks And Unconventional Monetary Policy written by Naoyuki Yoshino and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019 with Business & Economics categories.

This book explains how macroeconomic shocks stemming from the global financial crisis and recent unconventional monetary policies in developed economies have affected financial stability in emerging Asia.