Dampening Global Financial Shocks Can Macroprudential Regulation Help More Than Capital Controls
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Dampening Global Financial Shocks Can Macroprudential Regulation Help More Than Capital Controls
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Author : Katharina Bergant
language : en
Publisher: International Monetary Fund
Release Date : 2020-06-26
Dampening Global Financial Shocks Can Macroprudential Regulation Help More Than Capital Controls written by Katharina Bergant 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 2020-06-26 with Business & Economics categories.
We show that macroprudential regulation can considerably dampen the impact of global financial shocks on emerging markets. More specifically, a tighter level of regulation reduces the sensitivity of GDP growth to VIX movements and capital flow shocks. A broad set of macroprudential tools contribute to this result, including measures targeting bank capital and liquidity, foreign currency mismatches, and risky forms of credit. We also find that tighter macroprudential regulation allows monetary policy to respond more countercyclically to global financial shocks. This could be an important channel through which macroprudential regulation enhances macroeconomic stability. These findings on the benefits of macroprudential regulation are particularly notable since we do not find evidence that stricter capital controls provide similar gains.
Dampening Global Financial Shocks
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Author : Katharina Bergant
language : en
Publisher:
Release Date : 2023
Dampening Global Financial Shocks written by Katharina Bergant and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2023 with categories.
Staff Guidance Note On Macroprudential Policy
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Author : International Monetary Fund
language : en
Publisher: International Monetary Fund
Release Date : 2014-06-11
Staff Guidance Note On Macroprudential Policy written by International Monetary Fund 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 2014-06-11 with Business & Economics categories.
This note provides guidance to facilitate the staff’s advice on macroprudential policy in Fund surveillance. It elaborates on the principles set out in the “Key Aspects of Macroprudential Policy,” taking into account the work of international standard setters as well as the evolving country experience with macroprudential policy. The main note is accompanied by supplements offering Detailed Guidance on Instruments and Considerations for Low Income Countries
Macroprudential Policies And Capital Controls Over Financial Cycles
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Author : Maria Arakelyan
language : en
Publisher: International Monetary Fund
Release Date : 2023-08-25
Macroprudential Policies And Capital Controls Over Financial Cycles written by Maria Arakelyan 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 2023-08-25 with Business & Economics categories.
In this paper we assess the effectiveness of macroprudential policies and capital controls in supporting financial stability. We construct a large and granular dataset on prudential and capital flow management measures covering 53 countries during 1996-2016. Conditional on a credit boom, we study the impact of these policy measures on the probability of the credit boom ending in a bust. Our analysis suggests that macroprudential tools are effective from this perspective. If credit booms are accompanied by capital flow surges, in addition to macroprudential tools, capital controls on money market instruments including cross-border interbank lending tend to contribute to reducing the likelihood of a credit bust.
Recent Experiences In Managing Capital Inflows Cross Cutting Themes And Possible Policy Framework
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Author : International Monetary Fund. Strategy, Policy, & Review Department
language : en
Publisher: International Monetary Fund
Release Date : 2011-02-14
Recent Experiences In Managing Capital Inflows Cross Cutting Themes And Possible Policy Framework written by International Monetary Fund. Strategy, Policy, & Review Department 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 2011-02-14 with Business & Economics categories.
Emerging markets (EMs) are experiencing a surge in capital inflows, lifting asset prices and growth prospects. While inflows are typically beneficial for receiving countries, inflow surges can carry macroeconomic and financial stability risks. This paper reviews the recent experience of EMs in dealing with capital inflows and suggests a possible framework for IMF policy advice on the spectrum of measures available to policymakers to manage inflows, including macroeconomic policies, prudential measures and capital controls. Illustrative applications of this framework suggest that it may be appropriate for several countries, based on their current circumstances, to consider prudential measures or capital controls in response to capital inflows. The suggested framework is intended to inform staff policy advice to all Fund members with open capital accounts. It forms part of a broader effort to sharpen Fund surveillance, preserve evenhandedness, and foster greater global policy coordination. As indicated in the Supplement to this paper, this broader effort includes the development of “global rules of the game” on macroprudential policies, capital account liberalization, and reserve adequacy, and the preparation of spillover reports assessing spillovers from the five systemic economies—all of which will inform the current and broader framework being developed.
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.
A Modern Guide To Financial Shocks And Crises
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Author : Ferri, Giovanni
language : en
Publisher: Edward Elgar Publishing
Release Date : 2021-12-14
A Modern Guide To Financial Shocks And Crises written by Ferri, Giovanni 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 2021-12-14 with Business & Economics categories.
Offering a comprehensive guide to financial shocks and crises, this book explores their increasing occurrence in current market economies, as well as their power to wrench the macroeconomy. The book discusses three critical questions: what causes financial shocks; which channels may exacerbate their impact; and what policies could help avoid them or limit their negative effect on the economy and society at large.
Navigating Higher Rates Volatility And Liquidity Crises
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Author : Andreas Dombret
language : en
Publisher: Walter de Gruyter GmbH & Co KG
Release Date : 2024-12-16
Navigating Higher Rates Volatility And Liquidity Crises written by Andreas Dombret and has been published by Walter de Gruyter GmbH & Co KG this book supported file pdf, txt, epub, kindle and other format this book has been release on 2024-12-16 with Law categories.
When central banks started raising interest rates in reaction to the spike in inflation which followed the COVID-19 epidemic, they put an end to a more than a decade of "low for longer" interest rates to which the financial sector had adjusted their balance sheets and business models. The resulting "new monetary order" has required all parts of the financial sector to make serious adjustments. The fate of the US and Swiss banks caught up in the March 2023 "bank turmoil" can be seen as a cautionary tale for those who do not adjust in a timely fashion. This book reviews how the financial sector evolved during "low for longer" and examines how monetary policy, financial regulation and supervision, the banking and the non-bank financial sectors can be expected to evolve under this new order.
Preemptive Policies And Risk Off Shocks In Emerging Markets
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Author : Ms. Mitali Das
language : en
Publisher: International Monetary Fund
Release Date : 2022-01-07
Preemptive Policies And Risk Off Shocks In Emerging Markets written by Ms. Mitali Das 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 2022-01-07 with Business & Economics categories.
We show that “preemptive” capital flow management measures (CFM) can reduce emerging markets and developing countries’ (EMDE) external finance premia during risk-off shocks, especially for vulnerable countries. Using a panel dataset of 56 EMDEs during 1996–2020 at monthly frequency, we document that countries with preemptive policies in place during the five year window before risk-off shocks experienced relatively lower external finance premia and exchange rate volatility during the shock compared to countries which did not have such preemptive policies in place. We use the episodes of Taper Tantrum and COVID-19 as risk-off shocks. Our identification relies on a difference-in-differences methodology with country fixed effects where preemptive policies are ex-ante by construction and cannot be put in place as a response to the shock ex-post. We control the effects of other policies, such as monetary policy, foreign exchange interventions (FXI), easing of inflow CFMs and tightening of outflow CFMs that are used in response to the risk-off shocks. By reducing the impact of risk-off shocks on countries’ funding costs and exchange rate volatility, preemptive policies enable countries’ continued access to international capital markets during troubled times.
Facing The Global Financial Cycle What Role For Policy
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Author : Nicoletta Batini
language : en
Publisher: International Monetary Fund
Release Date : 2021-02-12
Facing The Global Financial Cycle What Role For Policy written by Nicoletta Batini 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 2021-02-12 with Business & Economics categories.
Abstract In this paper we ask whether countries can influence their exposure to changes in global financial conditions. Specifically, we show that even though we can model cross-country capital flows via a global factor that closely tracks changes in global financial conditions, there is a large degree of heterogeneity in the sensitivity of each country to this same global factor. We then evaluate whether this cross-country heterogeneity can be attributed to different policy choices, including measures of capital flow management, such as capital controls and macroprudential policies. In our main results, we show that higher levels of capital controls and macroprudential policies both dampen the sensitivity to the global factor. Furthermore, we show that countries’ monetary and exchange rate policies can also be successfully deployed. Overall, our results have implications that extend beyond the surge that preceded the 2008 global financial crisis, and that closely resonate in light of the financial disruptions that followed the COVID-19 pandemic.