Macroprudential Policies In Response To External Financial Shocks

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Macroprudential Policies In Response To External Financial Shocks

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Author : Irineu de Carvalho Filho
language : en
Publisher: International Monetary Fund
Release Date : 2023-01-20

Macroprudential Policies In Response To External Financial Shocks written by Irineu de Carvalho Filho 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 2023-01-20 with Business & Economics categories.

This paper examines how countries use Macroprudential Policies (MaPs) to respond to external shocks such as US monetary policy surprises or fluctuations in capital flows. Constructing a model of a small open economy with financial frictions and a MaP authority that adjusts loan to value (LTV) ratio limits on borrowers and capital adequacy ratio (CAR) limits on banks, we show that using MaPs where stochastic external financial shocks are present entails a trade-off between macro-financial volatility and GDP growth. The terms of the trade-off are a function of a few country characteristics that amplify financial channels of external monetary shocks. Estimating MaP reaction functions for a panel of 41 countries in the period 2000–2017, we find that countercyclical macroprudential policy in response to surprise US monetary tightening is more likely for countries with net short currency mismatches (that is, foreign currency denominated liabilities larger than foreign currency denominated assets), consistent with the model’s predictions. The paper also finds that domestic credit and interest rates are more insulated from US monetary tightening for countries that employ MaPs countercyclically.

On The Use Of Monetary And Macroprudential Policies For Small Open Economies

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Author : Mr.F. Gulcin Ozkan
language : en
Publisher: International Monetary Fund
Release Date : 2014-06-24

On The Use Of Monetary And Macroprudential Policies For Small Open Economies written by Mr.F. Gulcin Ozkan 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 2014-06-24 with Business & Economics categories.

We explore optimal monetary and macroprudential policy rules for a small open economy. Delegating 'lean against the wind' squarely to macroprudential policy provides a more robust policy mix to shock uncertainty—(i) if macroprudential measures exist, there are no significant welfare gains from monetary policy reacting to credit growth under a financial shock; and (ii) monetary responses to financial markets could generate bigger welfare losses than macroprudential responses under different shocks. The source of outstanding liabilities also plays a role in the choice of policy instrument— macroprudential policies are particularly effective for emerging markets where foreign borrowing is sizeable.

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.

Macroprudential Policy And Practice

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Author : Paul Mizen
language : en
Publisher: Cambridge University Press
Release Date : 2018-08-23

Macroprudential Policy And Practice written by Paul Mizen 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 2018-08-23 with Business & Economics categories.

A guide to the latest theoretical developments in macroprudential policy, the newest tool in central banking policymaking circles.

Imf Research Bulletin September 2011

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Author : International Monetary Fund. Research Dept.
language : en
Publisher: International Monetary Fund
Release Date : 2011-09-01

Imf Research Bulletin September 2011 written by International Monetary Fund. Research Dept. 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 2011-09-01 with Business & Economics categories.

The September 2011 issue of the IMF's quarterly "Research Bulletin" features a Q&A discussion about economic recovery in countries emerging after war or other open. The research summaries in this issue include: "Revisiting Capital Controls"; and "Capital Flows and Financial Stability: Monetary Policy and Macroprudential Responses." The September issue also provides details on IMF visiting scholars (mainly during the September - December 2011 period), as well as recent Working Papers and Staff Discussion Notes published by the IMF.

Macroprudential Policy Effects

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Author : Nina Biljanovska
language : en
Publisher: International Monetary Fund
Release Date : 2023-03-31

Macroprudential Policy Effects written by Nina Biljanovska 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 2023-03-31 with Business & Economics categories.

The global financial crisis (GFC) underscored the need for additional policy tools to safeguard financial stability and ultimately macroeconomic stability. Systemic financial vulnerabilities had developed under a seemingly tranquil macroeconomic surface of low inflation and small output gaps. This challenged the precrisis view that achieving these traditional policy targets was a sufficient condition for macroeconomic stability. Thus, new tools had to be deployed to target specific financial vulnerabilities and to build buffers to cushion adverse aggregate shocks, while allowing traditional policy levers, including monetary and microprudential policies to focus on their traditional roles. Macroprudential policy measures emerged as the solution to this gap. Some of these measures had been used before the GFC (mostly in emerging markets). But it was only after the crisis that they were more widely adopted, and the toolkit expanded. This spurred a growing body of empirical research on the effects and potential shortfalls of these measures, with a further deepening of this knowledge gaining importance as policymakers confront increased financial stability risks in the post-pandemic world. Recognizing that there still is much to learn, this paper takes stock of our expanding understanding about the effects (and side effects) of macroprudential measures by focusing on these questions: What have we learned about the effects of macroprudential policy in containing the buildup of vulnerabilities? What do we know about the effects on economic activity and resilience? How do policy effects vary with conditions and over time? How important are leakages and circumvention? How do the effects on credit depend on other policies?

One Shock Many Policy Responses

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Author : Rui Mano
language : en
Publisher: International Monetary Fund
Release Date : 2020-01-17

One Shock Many Policy Responses written by Rui Mano 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 2020-01-17 with Business & Economics categories.

Policymakers have relied on a wide range of policy tools to cope with capital flow shocks. And yet, the effects and interaction of these policies remain under debate, as does the motivation for using them. In this paper, quantile local projections are used to estimate the entire distribution of future policy responses to portfolio flow shocks for 20 emerging markets and understand the variety of policy choices across the sample. To assuage endogeneity concerns, estimates rely on the fact that global capital flows are exogenous from the viewpoint of any one of these countries. The paper finds that: (i) policy responses to capital flow shocks are heterogeneous across countries, fat-tailed—“extreme” responses tend to be more elastic than “typical” responses—and asymmetric—“extreme” responses tend to be more elastic with respect to outflows than to inflows; (ii) country characteristics are linked to policy choices—with cross-country differences in forex intervention relating to the size of balance sheet vulnerabilities and the depth of the forex market; (iii) the use of targeted macroprudential policy and capital flows management measures can help “free the hands” of monetary policy by allowing it to focus more squarely on domestic cyclical developments.

Central Bank Policy Mix Issues Challenges And Policy Responses

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Author : Perry Warjiyo
language : en
Publisher: Springer Nature
Release Date : 2022-01-22

Central Bank Policy Mix Issues Challenges And Policy Responses written by Perry Warjiyo and has been published by Springer Nature this book supported file pdf, txt, epub, kindle and other format this book has been release on 2022-01-22 with Business & Economics categories.

This is an open access book. This book is an integration of keynote speeches, lectures, and related teaching materials during the five years of the "Central Bank Policy Mix: Issues, Challenges and Policy Responses" flagship program of the BI Institute, the learning and research centre of Bank Indonesia. The book examines the interactions among central bank policies including monetary policy, exchange rate policy, macroprudential policy, and capital flow management and also elaborates on modeling issues and quantitative analysis of the interaction between macroeconomic variables and policy instruments.

Singapore

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Author : International Monetary Fund. Asia and Pacific Dept
language : en
Publisher: International Monetary Fund
Release Date : 2017-07-28

Singapore written by International Monetary Fund. Asia and Pacific Dept 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 2017-07-28 with Business & Economics categories.

This paper outlines that the banking sector remains healthy, backed by high capital, liquidity, provisioning and profitability ratios. Sector-wide nonperforming loans (NPLs) have increased slightly (to 2 percent in 2017:Q1), due largely to stresses in the Oil and Gas (O&G) services sector. Banks have responded by increasing provisions (using forward-looking measures of impairment) and restructuring their loans. Overall, the banking sector is well-positioned to withstand shocks. Capital and liquidity positions are sufficiently strong and well above regulatory requirements. Capital and liquidity positions of the local banking groups remain strong. Liquidity coverage ratios (LCR) of all three major banks remained high and rose in 2016:Q4, remaining well above the regulatory limits. The turnaround in bank’s profitability (especially the strong performance in 2017:Q1) is attributed to two factors: an acceleration in credit growth and increases in fee income from wealth management services. Local banks have been a key factor behind the wealth management sector’s growth and its main beneficiary.

Macro Financial Stability Policy In A Globalised World Lessons From International Experience Selected Papers From The Asian Monetary Policy Forum 2021 Special Edition And Mas Bis Conference

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Author : Edward S Robinson
language : en
Publisher: World Scientific
Release Date : 2022-12-28

Macro Financial Stability Policy In A Globalised World Lessons From International Experience Selected Papers From The Asian Monetary Policy Forum 2021 Special Edition And Mas Bis Conference written by Edward S Robinson and has been published by World Scientific this book supported file pdf, txt, epub, kindle and other format this book has been release on 2022-12-28 with Business & Economics categories.

Since at least the Great Financial Crisis, authorities around the world have increasingly relied on macroprudential policy to help secure financial stability and complement monetary policy as an integral element of a broader macro-financial stability framework. In today's interconnected global financial system, policy actions taken by the major advanced economies can have spillovers on the rest of the world through their impact on capital flows and exchange rates, potentially generating vulnerabilities across borders. Conversely, in emerging market economies, macroprudential policy as well as foreign exchange intervention and/or capital flow management policy can help mitigate the corresponding impact. This can in turn generate spillbacks on advanced economies — spillbacks that have become more sizeable as the emerging market economies' heft in the world has grown. Yet little is known about these interactions.The contents of this book are based on a conference held on 26-28 May 2021 and jointly hosted by the Monetary Authority of Singapore (MAS) and the Bank for International Settlements (BIS). It aims to contribute to existing literature on macro-financial policymaking by providing an overall conceptual framework and documenting the latest global trends and country experiences. In particular, it highlights the role of international spillovers and spillbacks, paying particular attention to emerging market economies. This book is essential reading for academics, graduate students and economic professionals. It can also serve as a handbook for policymakers at central banks, regulatory authorities and other government agencies tasked with designing and implementing macroprudential or more generally macro-financial stability policies. The book will also be of interest to researchers at international organisations.