Capital Inflows Exchange Rate Flexibility And Credit Booms

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Capital Inflows, Exchange Rate Flexibility, and Credit Booms

Mr.Nicolas E. Magud,Ms.Carmen Reinhart,Mr.Esteban Vesperoni
Capital Inflows Exchange Rate Flexibility and Credit Booms Book PDF

Author : Mr.Nicolas E. Magud,Ms.Carmen Reinhart,Mr.Esteban Vesperoni
Publisher : International Monetary Fund
Page : 24 pages
File Size : 47,8 Mb
Release : 2012-02-01
Category : Business & Economics
ISBN : 9781463936426

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Capital Inflows, Exchange Rate Flexibility, and Credit Booms by Mr.Nicolas E. Magud,Ms.Carmen Reinhart,Mr.Esteban Vesperoni Pdf

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

Mr.Nicolas E. Magud,Mr.Esteban Vesperoni
Exchange Rate Flexibility and Credit during Capital Inflow Reversals Book PDF

Author : Mr.Nicolas E. Magud,Mr.Esteban Vesperoni
Publisher : International Monetary Fund
Page : 30 pages
File Size : 45,7 Mb
Release : 2014-04-16
Category : Business & Economics
ISBN : 9781484353462

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Exchange Rate Flexibility and Credit during Capital Inflow Reversals by Mr.Nicolas E. Magud,Mr.Esteban Vesperoni Pdf

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

Nicolas E. Magud
Capital Inflows Exchange Rate Flexibility and Credit Booms Book PDF

Author : Nicolas E. Magud
Publisher : Unknown
Page : 31 pages
File Size : 47,7 Mb
Release : 2011
Category : Capital movements
ISBN : OCLC:1293331000

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Capital Inflows, Exchange Rate Flexibility, and Credit Booms by Nicolas E. Magud Pdf

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.

Capital Flows, Exchange Rate Flexibility, and the Real Exchange Rate

Mr.Tidiane Kinda,Jean-Louis Combes,Patrick Plane
Capital Flows Exchange Rate Flexibility and the Real Exchange Rate Book PDF

Author : Mr.Tidiane Kinda,Jean-Louis Combes,Patrick Plane
Publisher : International Monetary Fund
Page : 35 pages
File Size : 43,7 Mb
Release : 2011-01-01
Category : Business & Economics
ISBN : 9781455211876

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Capital Flows, Exchange Rate Flexibility, and the Real Exchange Rate by Mr.Tidiane Kinda,Jean-Louis Combes,Patrick Plane Pdf

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.

Credit Booms and Macroeconomic Dynamics

Mr.Marco Arena,Serpil Bouza,Ms.Era Dabla-Norris,Mrs.Kerstin Gerling,Lamin Njie
Credit Booms and Macroeconomic Dynamics Book PDF

Author : Mr.Marco Arena,Serpil Bouza,Ms.Era Dabla-Norris,Mrs.Kerstin Gerling,Lamin Njie
Publisher : International Monetary Fund
Page : 47 pages
File Size : 54,9 Mb
Release : 2015-01-22
Category : Business & Economics
ISBN : 9781484356869

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Credit Booms and Macroeconomic Dynamics by Mr.Marco Arena,Serpil Bouza,Ms.Era Dabla-Norris,Mrs.Kerstin Gerling,Lamin Njie Pdf

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 Inflows, Credit Growth, and Financial Systems

Ms.Deniz Igan,Zhibo Tan
Capital Inflows Credit Growth and Financial Systems Book PDF

Author : Ms.Deniz Igan,Zhibo Tan
Publisher : International Monetary Fund
Page : 31 pages
File Size : 46,6 Mb
Release : 2015-08-19
Category : Business & Economics
ISBN : 9781513581262

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Capital Inflows, Credit Growth, and Financial Systems by Ms.Deniz Igan,Zhibo Tan Pdf

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.

Capital Mobility, Exchange Rates, and Economic Crises

George Fane
Capital Mobility Exchange Rates and Economic Crises Book PDF

Author : George Fane
Publisher : Edward Elgar Publishing
Page : 238 pages
File Size : 50,5 Mb
Release : 2000-01-01
Category : Business & Economics
ISBN : 1781957967

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Capital Mobility, Exchange Rates, and Economic Crises by George Fane Pdf

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.

Are Capital Inflows Expansionary or Contractionary? Theory, Policy Implications, and Some Evidence

Mr.Olivier J. Blanchard,Mr.Jonathan David Ostry,Mr.Atish R. Ghosh,Mr.Marcos Chamon
Are Capital Inflows Expansionary or Contractionary Theory Policy Implications and Some Evidence Book PDF

Author : Mr.Olivier J. Blanchard,Mr.Jonathan David Ostry,Mr.Atish R. Ghosh,Mr.Marcos Chamon
Publisher : International Monetary Fund
Page : 24 pages
File Size : 50,9 Mb
Release : 2015-10-23
Category : Business & Economics
ISBN : 9781513549095

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Are Capital Inflows Expansionary or Contractionary? Theory, Policy Implications, and Some Evidence by Mr.Olivier J. Blanchard,Mr.Jonathan David Ostry,Mr.Atish R. Ghosh,Mr.Marcos Chamon Pdf

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

Sebastian Edwards
Capital Controls Exchange Rates and Monetary Policy in the World Economy Book PDF

Author : Sebastian Edwards
Publisher : Cambridge University Press
Page : 452 pages
File Size : 43,7 Mb
Release : 1997-06-13
Category : Business & Economics
ISBN : 0521597110

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Capital Controls, Exchange Rates, and Monetary Policy in the World Economy by Sebastian Edwards Pdf

The essays collected in this volume discuss the impact of increased capital mobility on macroeconomic performance.

From Fixed to Float

Mrs.Gilda Fernandez,Mr.Cem Karacadag,Rupa Duttagupta
From Fixed to Float Book PDF

Author : Mrs.Gilda Fernandez,Mr.Cem Karacadag,Rupa Duttagupta
Publisher : International Monetary Fund
Page : 40 pages
File Size : 55,8 Mb
Release : 2004-07-01
Category : Business & Economics
ISBN : 9781451854930

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From Fixed to Float by Mrs.Gilda Fernandez,Mr.Cem Karacadag,Rupa Duttagupta Pdf

This paper identifies the institutional and operational requisites for transitions to floating exchange rate regimes. In particular, it explores key issues underlying the transition, including developing a deep and liquid foreign exchange market, formulating intervention policies consistent with the new regime, establishing an alternative nominal anchor in the context of a new monetary policy framework, and building the capacity of market participants to manage exchange rate risks and of supervisory authorities to regulate and monitor them. It also assesses the factors that influence the pace of exit and the appropriate sequencing of exchange rate flexibility and capital account liberalization.

Capital Inflows and Balance of Payments Pressures

Mr.Juan Zalduendo,Ms.Manuela Goretti,Mr.Bikas Joshi,Mr.Atish R. Ghosh,Ms.Uma Ramakrishnan,Mr.Alun H. Thomas
Capital Inflows and Balance of Payments Pressures Book PDF

Author : Mr.Juan Zalduendo,Ms.Manuela Goretti,Mr.Bikas Joshi,Mr.Atish R. Ghosh,Ms.Uma Ramakrishnan,Mr.Alun H. Thomas
Publisher : International Monetary Fund
Page : 21 pages
File Size : 42,5 Mb
Release : 2008-06-01
Category : Business & Economics
ISBN : 9781451945997

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Capital Inflows and Balance of Payments Pressures by Mr.Juan Zalduendo,Ms.Manuela Goretti,Mr.Bikas Joshi,Mr.Atish R. Ghosh,Ms.Uma Ramakrishnan,Mr.Alun H. Thomas Pdf

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.

Managing Capital Inflows

Mr.Jonathan David Ostry,Mr.Atish R. Ghosh,Mr.Karl Friedrich Habermeier,Mr.Luc Laeven,Mr.Marcos Chamon,MissMahvash Qureshi,Annamaria Kokenyne
Managing Capital Inflows Book PDF

Author : Mr.Jonathan David Ostry,Mr.Atish R. Ghosh,Mr.Karl Friedrich Habermeier,Mr.Luc Laeven,Mr.Marcos Chamon,MissMahvash Qureshi,Annamaria Kokenyne
Publisher : International Monetary Fund
Page : 41 pages
File Size : 43,7 Mb
Release : 2011-04-05
Category : Business & Economics
ISBN : 9781463926540

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Managing Capital Inflows by Mr.Jonathan David Ostry,Mr.Atish R. Ghosh,Mr.Karl Friedrich Habermeier,Mr.Luc Laeven,Mr.Marcos Chamon,MissMahvash Qureshi,Annamaria Kokenyne Pdf

Staff Discussion Notes showcase the latest policy-related analysis and research being developed by individual IMF staff and are published to elicit comment and to further debate. These papers are generally brief and written in nontechnical language, and so are aimed at a broad audience interested in economic policy issues. This Web-only series replaced Staff Position Notes in January 2011.

Exchange Rate Regimes in Selected Advanced Transition Economies

International Monetary Fund
Exchange Rate Regimes in Selected Advanced Transition Economies Book PDF

Author : International Monetary Fund
Publisher : International Monetary Fund
Page : 26 pages
File Size : 44,8 Mb
Release : 2000-04-01
Category : Business & Economics
ISBN : 9781451974119

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Exchange Rate Regimes in Selected Advanced Transition Economies by International Monetary Fund Pdf

Since beginning economic transition, the Czech Republic, Estonia, Hungary, Poland, and Slovenia have—with much success—employed diverse exchange rate regimes. As these countries approach EU accession, they will need to avoid the perils of too much or too little exchange rate variability when capital flows are likely to be large and volatile; narrow band arrangements in particular could be problematic. The exception is Estonia, where there are good arguments for retaining the currency board arrangement. Countries wishing to join the euro area at an early stage should not leave the removal of remaining capital controls to the last minute.

Moving to Greater Exchange Rate Flexibility

Ms. Inci Ötker
Moving to Greater Exchange Rate Flexibility Book PDF

Author : Ms. Inci Ötker
Publisher : International Monetary Fund
Page : 94 pages
File Size : 50,8 Mb
Release : 2007-04-30
Category : Business & Economics
ISBN : 9781451979527

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Moving to Greater Exchange Rate Flexibility by Ms. Inci Ötker Pdf

Many countries have moved towards more flexible exchange rate regimes over the last decade to take advantage of greater monetary policy autonomy and flexibility in responding to external shocks. Some reluctance to let go of pegged exchange rates persists, however, despite the benefits of flexibility. The institutional and operational requirements needed to support a floating exchange rate, as well as difficulties in assessing the right time and manner to exit, tend to be additional factors in this reluctance. This volume presents the concrete steps taken by a number of countries in transition to greater exchange rate flexibility and elaborates on the operational ingredients that proved helpful in promoting successful and durable transitions. It attempts to provide a better understanding (and hence a "road map") of how these various operational ingredients were established and coordinated, how their implementation interacted with macro and other conditions, and how they contributed to the smoothness of each transition.

Exchange Rates, Capital Flows, and Monetary Policy in a Changing World Economy

William C. Gruben,David M. Gould,Carlos E. Zarazaga
Exchange Rates Capital Flows and Monetary Policy in a Changing World Economy Book PDF

Author : William C. Gruben,David M. Gould,Carlos E. Zarazaga
Publisher : Springer Science & Business Media
Page : 247 pages
File Size : 54,6 Mb
Release : 2012-12-06
Category : Business & Economics
ISBN : 9781461561750

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Exchange Rates, Capital Flows, and Monetary Policy in a Changing World Economy by William C. Gruben,David M. Gould,Carlos E. Zarazaga Pdf

The dramatic growth of international capital flow has provided unprecedented opportunities and risks in emerging markets. This book is the result of a conference exploring this phenomenon, sponsored by the Federal Reserve Bank of Dallas. The issues explored include direct versus portfolio investment; exchange rates and economic growth; and optimal exchange rate policy for stabilizing inflation in developing countries. It concludes with a panel discussion on central bank coordination in the midst of exchange rate instability.