Open AccessPosted Content
Policymaking from a "macroprudential" perspective in emerging market economies
Reads0
Chats0
TLDR
This paper reviewed some of these instruments, drawing in part on material provided by central banks to the BIS, including foreign exchange market intervention and foreign reserve accumulation; measures to strengthen bank balance sheets and capital and measures to maintain the quality of credit or to ifnluence credit growth or allocation.Abstract:
Recurrent capital inflows pose important challenges for authorities in emerging market economies seeking to preserve financial stability. Raising interest rates to dampen imbalances that could arise from capital flows can also attract more capital inflows and accentuate appreciation pressures. For this reason authorities have used a number of instruments to mitigate the effects of capital flows, all with financial stability implications. Many of these instruments (eg reserve requirements) may have been used for other purposes but the global financial crisis has raised interest in examining them from a financial stability, or "macroprudential" perspective. This paper reviews some of these instruments, drawing in part on material provided by central banks to the BIS. The instruments include foreign exchange market intervention and foreign reserve accumulation; measures to strengthen bank balance sheets and capital and measures to maintain the quality of credit or to ifnluence credit growth or allocation, and capital controls. Certain implementation issues are also discussed, including signals to respond to, timing of prudential measures and procyclicality and effectiveness and calibration. An unresolved question is how the instruments described are to be used in conjunction with interest rate policy. Over the medium term, these instruments raise concerns because they may impair the development of the financial system.read more
Citations
More filters
Journal ArticleDOI
What Do We Know About the Effects of Macroprudential Policy
TL;DR: The literature on the effectiveness of macro-prudential policy tools is still in its infancy and has so far provided only limited guidance for policy decisions as discussed by the authors, however, increasing efforts have been made to fill this gap.
Posted Content
Sailing through the Global Financial Storm: Brazil's recent experience with monetary and macroprudential policies to lean against the financial cycle and deal with systemic risks
TL;DR: The Central Bank of Brazil has always made clear that macro-prudential measures are not a substitute for monetary policy action and are primarily geared at addressing financial stability risks as discussed by the authors.
Journal ArticleDOI
Macroeconomic Stability, Financial Stability, and Monetary Policy Rules
TL;DR: The authors reviewed arguments for and against attributing explicitly a financial stability objective to monetary policy, and concluded that monetary policy is not a substitute to macro-prudential regulation, because monetary policy cannot, in any event, address the cross-section dimension of systemic risk, and because MICs often face circumstances (e.g., sudden floods) where it could have undesirable side effects if used as an exclusive policy instrument.
The prudential regulation of financial institutions: why regulatory responses to the crisis might not prove sufficient
TL;DR: The authors surveys recent international developments concerning the prudential regulation of financial institutions: banks, the shadow banking system and insurance companies, and concludes that, while substantial progress has been made, the global economy still remains vulnerable to possible future financial instability.
Posted Content
Reserve Requirements for Price and Financial Stability: When Are They Effective?
Christian Glocker,Pascal Towbin +1 more
TL;DR: In this article, the authors investigated the circumstances under which reserve requirements are an appropriate policy tool for price or financial stability and showed that reserve requirements can support the price stability objective only if financial frictions are important and lead to substantial improvements if there is a financial stability objective.