Exchange Rate Flexibility And Credit During Capital Inflow Reversals

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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 : 54,7 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

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 : 40,9 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.

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 : 50,6 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.

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 : 51,8 Mb
Release : 2014-04-16
Category : Business & Economics
ISBN : 9781475543735

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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 : 50,5 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 Controls and Capital Flows in Emerging Economies

Sebastian Edwards
Capital Controls and Capital Flows in Emerging Economies Book PDF

Author : Sebastian Edwards
Publisher : University of Chicago Press
Page : 699 pages
File Size : 55,8 Mb
Release : 2009-02-15
Category : Business & Economics
ISBN : 9780226184999

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Capital Controls and Capital Flows in Emerging Economies by Sebastian Edwards Pdf

Some scholars argue that the free movement of capital across borders enhances welfare; others claim it represents a clear peril, especially for emerging nations. In Capital Controls and Capital Flows in Emerging Economies, an esteemed group of contributors examines both the advantages and the pitfalls of restricting capital mobility in these emerging nations. In the aftermath of the East Asian currency crises of 1997, the authors consider mechanisms that eight countries have used to control capital inflows and evaluate their effectiveness in altering the maturity of the resulting external debt and reducing macroeconomic vulnerability. This volume is essential reading for all those interested in emerging nations and the costs and benefits of restricting international capital flows.

Managing Capital Flows

Masahiro Kawai,Mario B. Lamberte
Managing Capital Flows Book PDF

Author : Masahiro Kawai,Mario B. Lamberte
Publisher : Edward Elgar Publishing
Page : 465 pages
File Size : 45,6 Mb
Release : 2010-01-01
Category : Business & Economics
ISBN : 9781849806879

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Managing Capital Flows by Masahiro Kawai,Mario B. Lamberte Pdf

Managing Capital Flows provides analyses that can help policymakers develop a framework for managing capital flows that is consistent with prudent macroeconomic and financial sector stability. While capital inflows can provide emerging market economies with invaluable benefits in pursuing economic development and growth, they can also pose serious policy challenges for macroeconomic management and financial sector supervision. The expert contributors cover a wide range of issues related to managing capital flows and analyze the experience of emerging Asian economies in dealing with surges in capital inflows. They also discuss possible policy measures to manage capital flows while remaining consistent with the goals of macroeconomic and financial sector stability. Building on this analysis, the book presents options for workable national policies and regional policy cooperation, particularly in exchange rate management. Containing chapters that bring in international experiences relevant to Asia and other emerging market economies, this insightful book will appeal to policymakers in governments and financial institutions, as well as public and private finance experts. It will also be of great interest to advanced students and academic researchers in finance.

Policy Responses to Capital Flows in Emerging Markets

Mahmood Pradhan,Mr.Ravi Balakrishnan,Reza Baqir,Mr.Geoffrey Heenan,Sylwia Nowak,Ceyda Oner,Mr.Sanjaya Panth
Policy Responses to Capital Flows in Emerging Markets Book PDF

Author : Mahmood Pradhan,Mr.Ravi Balakrishnan,Reza Baqir,Mr.Geoffrey Heenan,Sylwia Nowak,Ceyda Oner,Mr.Sanjaya Panth
Publisher : International Monetary Fund
Page : 45 pages
File Size : 53,6 Mb
Release : 2011-04-20
Category : Business & Economics
ISBN : 9781463935122

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Policy Responses to Capital Flows in Emerging Markets by Mahmood Pradhan,Mr.Ravi Balakrishnan,Reza Baqir,Mr.Geoffrey Heenan,Sylwia Nowak,Ceyda Oner,Mr.Sanjaya Panth 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.

Capital Flows at Risk: Taming the Ebbs and Flows

Mr.R. G Gelos,Lucyna Gornicka,Mr.Robin Koepke,Ms.Ratna Sahay,Ms.Silvia Sgherri
Capital Flows at Risk Taming the Ebbs and Flows Book PDF

Author : Mr.R. G Gelos,Lucyna Gornicka,Mr.Robin Koepke,Ms.Ratna Sahay,Ms.Silvia Sgherri
Publisher : International Monetary Fund
Page : 44 pages
File Size : 47,8 Mb
Release : 2019-12-20
Category : Business & Economics
ISBN : 9781513522906

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Capital Flows at Risk: Taming the Ebbs and Flows by Mr.R. G Gelos,Lucyna Gornicka,Mr.Robin Koepke,Ms.Ratna Sahay,Ms.Silvia Sgherri Pdf

The volatility of capital flows to emerging markets continues to pose challenges to policymakers. In this paper, we propose a new framework to answer critical policy questions: What policies and policy frameworks are most effective in dampening sharp capital flow movements in response to global shocks? What are the near- versus medium-term trade-offs of different policies? We tackle these questions using a quantile regression framework to predict the entire future probability distribution of capital flows to emerging markets, based on current domestic structural characteristics, policies, and global financial conditions. This new approach allows policymakers to quantify capital flows risks and evaluate policy tools to mitigate them, thus building the foundation of a risk management framework for capital flows.

No Pain, All Gain? Exchange Rate Flexibility and the Expenditure-Switching Effect

Mr.Yan Carriere-Swallow,Mr.Nicolas E Magud,Juan Yepez
No Pain All Gain Exchange Rate Flexibility and the Expenditure Switching Effect Book PDF

Author : Mr.Yan Carriere-Swallow,Mr.Nicolas E Magud,Juan Yepez
Publisher : International Monetary Fund
Page : 30 pages
File Size : 41,8 Mb
Release : 2018-09-28
Category : Business & Economics
ISBN : 9781484378236

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No Pain, All Gain? Exchange Rate Flexibility and the Expenditure-Switching Effect by Mr.Yan Carriere-Swallow,Mr.Nicolas E Magud,Juan Yepez Pdf

Theoretical models on the relationship between prices and exchange rates predict that the magnitude of expenditure switching affects the optimal choice of exchange rate regime. Focusing on the transmission of terms-of-trade shocks to domestic real variables we document that the magnitude of the expenditure switching effect is positively associated to the degree of exchange rate flexibility. Moreover, results show that flexible exchange rates allow for significant adjustment in relative prices, which in turn lowers the burden of adjustment on demand for domestic goods and, in some cases, facilitates a faster and more durable external adjustment process. These results, which are robust to accounting for possible non-linearities due to balance sheet effects or currency mismatches, shed new light on the shock absorbing properties of flexible exchange rates.

Annual Report on Exchange Arrangements and Exchange Restrictions 2014

International Monetary Fund. Monetary and Capital Markets Department
Annual Report on Exchange Arrangements and Exchange Restrictions 2014 Book PDF

Author : International Monetary Fund. Monetary and Capital Markets Department
Publisher : International Monetary Fund
Page : 214 pages
File Size : 54,5 Mb
Release : 2014-10-09
Category : Business & Economics
ISBN : 9781498335171

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Annual Report on Exchange Arrangements and Exchange Restrictions 2014 by International Monetary Fund. Monetary and Capital Markets Department Pdf

This is the 65th issue of the AREAER. It provides a description of the foreign exchange arrangements, exchange and trade systems, and capital controls of all IMF member countries. It also provides information on the operation of foreign exchange markets and controls on international trade. It describes controls on capital transactions and measures implemented in the financial sector, including prudential measures. In addition, it reports on exchange measures imposed by member countries for security reasons. A single table provides a snapshot of the exchange and trade systems of all IMF member countries. The Overview describes in detail how the general trend toward foreign exchange liberalization continued during 2013, alongside a strengthening of the financial sector regulatory framework. A Special Topic essay examines the dynamics and evolution of capital flows. The AREAER is available in several formats. The Overview in print and online, and the detailed information for each of the 191 member countries and territories is included on a CD that accompanies the printed Overview and in an online database, AREAER Online. In addition to the information on the exchange and trade system of IMF member countries in 2013, AREAER Online contains historical data published in previous issues of the AREAER. It is searchable by year, country, and category of measure and allows cross country comparisons for time series.

The European Union and the Challenges of the New Global Context

Ileana Tache
The European Union and the Challenges of the New Global Context Book PDF

Author : Ileana Tache
Publisher : Cambridge Scholars Publishing
Page : 280 pages
File Size : 47,9 Mb
Release : 2015-09-04
Category : Political Science
ISBN : 9781443882019

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The European Union and the Challenges of the New Global Context by Ileana Tache Pdf

This book investigates the new challenges confronted by the EU as an international actor within the context of recent economic and political developments, with particular attention to common foreign and security policies; the appraisal of development-aid policies; EU sanctions in the post-Soviet space, as harder instruments complementing the toolbox of the EU “soft power” polity; preferential trade agreements as a key element of EU external trade policy; external relations of the EU; international aspects of the monetary policy of the ECB in the context of the financial and sovereign debt crisis; massive capital flows and the boom-bust cycle in the emerging Europe; and the macroeconomic modelling of the relationship between the EU and the rest of the world. Thoroughly up-to-date, the contributions to this volume offer analyses of recent, tense global events, including EU responses to the uprising in Arab countries and the Ukrainian conflict. The book concludes with the proposal of a unique macroeconomic model in which the EU is conceptualised as constituting a block “against” the rest of the world, but also a two country model in itself, made up of Eurozone and non-Eurozone members.

Emerging Market Economies and Financial Globalization

Leonardo E. Stanley
Emerging Market Economies and Financial Globalization Book PDF

Author : Leonardo E. Stanley
Publisher : Anthem Press
Page : 260 pages
File Size : 46,9 Mb
Release : 2018-03-15
Category : Business & Economics
ISBN : 9781783086757

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Emerging Market Economies and Financial Globalization by Leonardo E. Stanley Pdf

In the past, foreign shocks arrived to national economies mainly through trade channels, and transmissions of such shocks took time to come into effect. However, after capital globalization, shocks spread to markets almost immediately. Despite the increasing macroeconomic dangers that the situation generated at emerging markets in the South, nobody at the North was ready to acknowledge the pro-cyclicality of the financial system and the inner weakness of “decontrolled” financial innovations because they were enjoying from the “great moderation.” Monetary policy was primarily centered on price stability objectives, without considering the mounting credit and asset price booms being generated by market liquidity and the problems generated by this glut. Mainstream economists, in turn, were not majorly attracted in integrating financial factors in their models. External pressures on emerging market economies (EMEs) were not eliminated after 2008, but even increased as international capital flows augmented in relevance thereafter. Initially economic authorities accurately responded to the challenge, but unconventional monetary policies in the US began to create important spillovers in EMEs. Furthermore, in contrast to a previous surge in liquidity, funds were now transmitted to EMEs throughout the bond market. The perspective of an increase in US interest rates by the FED is generating a reversal of expectations and a sudden flight to quality. Emerging countries’ currencies began to experience higher volatility levels, and depreciation movements against a newly strong US dollar are also increasingly observed. Consequently, there are increasing doubts that the “unexpected” favorable outcome observed in most EMEs at the aftermath of the Global Financial Crisis (GFC) would remain.

Collateral Damage

Mr.Pablo Druck,Mr.Nicolas E. Magud,Rodrigo Mariscal
Collateral Damage Book PDF

Author : Mr.Pablo Druck,Mr.Nicolas E. Magud,Rodrigo Mariscal
Publisher : International Monetary Fund
Page : 42 pages
File Size : 53,7 Mb
Release : 2015-07-29
Category : Business & Economics
ISBN : 9781498323338

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Collateral Damage by Mr.Pablo Druck,Mr.Nicolas E. Magud,Rodrigo Mariscal Pdf

We document that, historically, although stronger growth in the U.S. increases growth in emerging markets, U.S. dollar appreciation (depreciation) cycles—which are highly persistent—mitigate (amplify) the impact on real GDP growth in emerging markets. We argue that the main transmission channel of the latter is through an income effect: as the dollar appreciates, commodity prices fall; weaker commodity prices depress domestic demand via lower real income; real GDP in emerging markets decelerates; and vice versa. These effects hold despite any potential expenditure-switching effect resulting from the relative (to the U.S. dollar) currency depreciation of emerging market economies. We also show the negative effect on emerging markets’ growth of U.S. interest rates beyond the effects of the U.S. real exchange rate and real GDP growth. Therefore, at the time of writing, emerging markets’ growth is expected to remain subdued reflecting, intera alia, the expected persistence of the strong dollar and the anticipated increased in the U.S. interest rates.

Review of The Institutional View on The Liberalization and Management of Capital Flows — Background Note on Capital Flows and Capital Flow Management Measures — Benefits and Costs

Gurnain Kaur Pasricha,Erlend Nier
Review of The Institutional View on The Liberalization and Management of Capital Flows Background Note on Capital Flows and Capital Flow Management Measures Benefits and Costs Book PDF

Author : Gurnain Kaur Pasricha,Erlend Nier
Publisher : International Monetary Fund
Page : 23 pages
File Size : 46,7 Mb
Release : 2022-03-30
Category : Business & Economics
ISBN : 9798400205491

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Review of The Institutional View on The Liberalization and Management of Capital Flows — Background Note on Capital Flows and Capital Flow Management Measures — Benefits and Costs by Gurnain Kaur Pasricha,Erlend Nier Pdf

The Fund’s Institutional View (IV) recognizes the benefits of and risks associated with capital flows. Since the IV was adopted, a growing literature has provided additional insights into the benefits and risks from capital flows. This note summarizes the insights from the recent literature and the experiences of staff since the adoption of the IV that have informed this review.