Capital Inflows Exchange Rate Flexibility And Credit Booms
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Capital Inflows Exchange Rate Flexibility And Credit Booms
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Author : Mr.Nicolas E. Magud
language : en
Publisher: International Monetary Fund
Release Date : 2012-02-01
Capital Inflows Exchange Rate Flexibility And Credit Booms written by Mr.Nicolas E. Magud 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 2012-02-01 with Business & Economics categories.
The prospects of expansionary monetary policies in the advanced countries for the foreseeable future have renewed the debate over policy options to cope with large capital inflows that are, at least partly, driven by low interest rates in the financial centers. Historically, capital flow bonanzas have often fueled sharp credit expansions in advanced and emerging market economies alike. Focusing primarily on emerging markets, we analyze the impact of exchange rate flexibility on credit markets during periods of large capital inflows. We show that bank credit grows more rapidly and its composition tilts to foreign currency in economies with less flexible exchange rate regimes, and that these results are not explained entirely by the fact that the latter attract more capital inflows than economies with more flexible regimes. Our findings thus suggest countries with less flexible exchange rate regimes may stand to benefit the most from regulatory policies that reduce banks' incentives to tap external markets and to lend/borrow in foreign currency; these policies include marginal reserve requirements on foreign lending, currency-dependent liquidity requirements, and higher capital requirement and/or dynamic provisioning on foreign exchange loans.
Exchange Rate Flexibility And Credit During Capital Inflow Reversals
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Author : Mr.Nicolas E. Magud
language : en
Publisher: International Monetary Fund
Release Date : 2014-04-16
Exchange Rate Flexibility And Credit During Capital Inflow Reversals written by Mr.Nicolas E. Magud 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 2014-04-16 with Business & Economics categories.
We document the behavior of macro and credit variables during episodes of capital inflows reversals in economies with different degrees of exchange rate flexibility. We find that exchange rate flexibility is associated with milder credit growth during the boom but, even though smaller than in more rigid regimes, it cannot shield the economy from a credit reversal. Furthermore, we observe what we dub as a recovery puzzle: credit growth in economies with more flexible exchange rate regimes remains tepid well after the capital flow reversal takes place. This results stress the complementarity of macro-prudential policies with the exchange rate regime. More flexible regimes could help smoothing the credit cycle through capital surchages and dynamic provisioning that build buffers to counteract the credit recovery puzzle. In contrast, more rigid exchange rate regimes would benefit the most from measures to contain excessive credit growth during booms, such as reserve requirements, loan-to-income ratios, and debt-to-income and debt-service-to-income limits.
Capital Inflows Exchange Rate Flexibility And Credit Booms
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Author : Nicolas E. Magud
language : en
Publisher:
Release Date : 2011
Capital Inflows Exchange Rate Flexibility And Credit Booms written by Nicolas E. Magud and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011 with Capital movements categories.
The prospects of expansionary monetary policies in the advanced countries for the foreseeable future have renewed the debate over policy options to cope with large capital inflows that are, at least partly, driven by low interest rates in the financial centers. Historically, capital flow bonanzas have often fueled sharp credit expansions in advanced and emerging market economies alike. Focusing primarily on emerging markets, we analyze the impact of exchange rate flexibility on credit markets during periods of large capital inflows. We show that credit grows more rapidly and its composition tilts to foreign currency in economies with less flexible exchange rate regimes, and that these results are not explained entirely by the fact that the latter attract more capital inflows than economies with more flexible regimes. Our findings thus suggest countries with less flexible exchange rate regimes may stand to benefit the most from regulatory policies that reduce banks' incentives to tap external markets and to lend/borrow in foreign currency; these policies include marginal reserve requirements on foreign lending, currency-dependent liquidity requirements, and higher capital requirement and/or dynamic provisioning on foreign exchange loans -- National Bureau of Economic Research web site.
Credit Booms And Macroeconomic Dynamics
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Author : Mr.Marco Arena
language : en
Publisher: International Monetary Fund
Release Date : 2015-01-22
Credit Booms And Macroeconomic Dynamics written by Mr.Marco Arena 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 2015-01-22 with Business & Economics categories.
Using a comprehensive database on bank credit, covering 135 developing countries over the period 1960–2011, we identify, document, and compare the macro-economic dynamics of credit booms across low- and middle-income countries. The results suggest that while the duration and magnitude of credit booms is similar across country groups, macro-economic dynamics differ somewhat in low-income countries. We further find that surges in capital inflows are associated with credit booms. Moreover, credit booms associated with banking crises exhibit distinct macroeconomic dynamics, while also reflecting a potentially large deviation of credit from country fundamentals. These results suggest that low-income countries should remain mindful of the inter-linkages between financial liberalization, increased cross-border banking activities, and rapid credit growth.
Capital Flows Exchange Rate Flexibility And The Real Exchange Rate
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Author : Mr.Tidiane Kinda
language : en
Publisher: International Monetary Fund
Release Date : 2011-01-01
Capital Flows Exchange Rate Flexibility And The Real Exchange Rate written by Mr.Tidiane Kinda 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 2011-01-01 with Business & Economics categories.
This paper analyzes the impact of capital inflows and exchange rate flexibility on the real exchange rate in developing countries based on panel cointegration techniques. The results show that public and private flows are associated with a real exchange rate appreciation. Among private flows, portfolio investment has the highest appreciation effect-almost seven times that of foreign direct investment or bank loans-and private transfers have the lowest effect. Using a de facto measure of exchange rate flexibility, we find that a more flexible exchange rate helps to dampen appreciation of the real exchange rate stemming from capital inflows.
Capital Mobility Exchange Rates And Economic Crises
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Author : George Fane
language : en
Publisher: Edward Elgar Publishing
Release Date : 2000-01-01
Capital Mobility Exchange Rates And Economic Crises written by George Fane and has been published by Edward Elgar Publishing this book supported file pdf, txt, epub, kindle and other format this book has been release on 2000-01-01 with Business & Economics categories.
If flexible exchange rates are not adopted, central banks should at least avoid the widespread practice of trying to sterilise the monetary effects of capital flows." "The author argues that the implementation of this plan will be a far more effective way of enhancing financial stability than controlling international capital flows, or trying to force private lenders to make new loans to countries that suffer crises."--BOOK JACKET.
Capital Inflows Credit Growth And Financial Systems
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Author : Ms.Deniz Igan
language : en
Publisher: International Monetary Fund
Release Date : 2015-08-19
Capital Inflows Credit Growth And Financial Systems written by Ms.Deniz Igan 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 2015-08-19 with Business & Economics categories.
Exploiting a granular panel dataset that breaks down capital inflows into FDI, portfolio and other categories, and distinguishes between credit to the household sector and to the corporate sector, we investigate the association between capital inflows and credit growth. We find that non-FDI capital inflows boost credit growth and increase the likelihood of credit booms in both household and corporate sectors. For household credit growth, the composition of capital inflows appears to be more important than financial system characteristics. In contrast, for corporate credit growth, both the composition and the financial system matter. Regardless of sectors and financial systems, net other inflows are always linked to rapid credit growth. Firm-level data corroborate these findings and hint at a causal link: net other inflows are related to more rapid credit growth for firms that rely more heavily on external financing. Further explorations on how capital flows translate into more credit indicate that both demand and supply side factors play a role.
Are Capital Inflows Expansionary Or Contractionary Theory Policy Implications And Some Evidence
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Author : Mr.Olivier J. Blanchard
language : en
Publisher: International Monetary Fund
Release Date : 2015-10-23
Are Capital Inflows Expansionary Or Contractionary Theory Policy Implications And Some Evidence written by Mr.Olivier J. Blanchard 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 2015-10-23 with Business & Economics categories.
The workhorse open-economy macro model suggests that capital inflows are contractionary because they appreciate the currency and reduce net exports. Emerging market policy makers however believe that inflows lead to credit booms and rising output, and the evidence appears to go their way. To reconcile theory and reality, we extend the set of assets included in the Mundell-Fleming model to include both bonds and non-bonds. At a given policy rate, inflows may decrease the rate on non-bonds, reducing the cost of financial intermediation, potentially offsetting the contractionary impact of appreciation. We explore the implications theoretically and empirically, and find support for the key predictions in the data.
Capital Controls Exchange Rates And Monetary Policy In The World Economy
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Author : Sebastian Edwards
language : en
Publisher: Cambridge University Press
Release Date : 1997-06-13
Capital Controls Exchange Rates And Monetary Policy In The World Economy written by Sebastian Edwards and has been published by Cambridge University Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 1997-06-13 with Business & Economics categories.
The essays collected in this volume discuss the impact of increased capital mobility on macroeconomic performance.
Capital Inflows And Balance Of Payments Pressures
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Author : Mr.Juan Zalduendo
language : en
Publisher: International Monetary Fund
Release Date : 2008-06-01
Capital Inflows And Balance Of Payments Pressures written by Mr.Juan Zalduendo 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 2008-06-01 with Business & Economics categories.
Although capital inflows are generally beneficial to recipient countries, they also pose a challenge for the conduct of economic policy. This paper proposes a conceptual taxonomy to guide the design of policy responses in the face of capital flows. We explore how responses to capital surges should be differentiated based on the source of balance of payments pressures. We also examine whether the policy choices in emerging market countries conform to the taxonomy's predictions and find some correspondence, especially during periods of high global liquidity.