The Interaction Of Monetary And Macroprudential Policies Background Paper

Author : International Monetary Fund. Monetary and Capital Markets Department,International Monetary Fund. Western Hemisphere Dept.,International Monetary Fund. European Dept.
Publisher : International Monetary Fund
Page : 68 pages
File Size : 46,9 Mb
Release : 2012-12-27
Category : Business & Economics
ISBN : 9781498339513

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The Interaction of Monetary and Macroprudential Policies - Background Paper by International Monetary Fund. Monetary and Capital Markets Department,International Monetary Fund. Western Hemisphere Dept.,International Monetary Fund. European Dept. Pdf

This paper provides background material to support the Board paper on the interaction of monetary and macroprudential policies. It analyzes the scope for and evidence on interactions between monetary and macroprudential policies. It first reviews a recent conceptual literature on interactive effects that arise when both macroprudential and monetary policy are employed. It goes on to explore the “side effects” of monetary policy on financial stability and their implications for macroprudential policy. It finally addresses the strength of possible effects of macroprudential policies on output and price stability, and draws out implications for the conduct of monetary policy.

Author : International Monetary Fund. Monetary and Capital Markets Department,International Monetary Fund. Research Dept.
Publisher : International Monetary Fund
Page : 36 pages
File Size : 50,7 Mb
Release : 2012-12-29
Category : Business & Economics
ISBN : 9781498339506

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The Interaction of Monetary and Macroprudential Policies by International Monetary Fund. Monetary and Capital Markets Department,International Monetary Fund. Research Dept. Pdf

The recent crisis showed that price stability does not guarantee macroeconomic stability. In several countries, dangerous financial imbalances developed under low inflation and small output gaps. To ensure macroeconomic stability, policy has to include financial stability as an additional objective. But a new objective demands new tools: macroprudential tools that can target specific sources of financial imbalances (something monetary policy is not well suited to do). Effective macroprudential policies (which include a range of constraints on leverage and the composition of balance sheets) could then contain risks ex ante and help build buffers to absorb shocks ex post.

Author : International Monetary Fund. Fiscal Affairs Dept.,International Monetary Fund. Monetary and Capital Markets Department
Publisher : International Monetary Fund
Page : 64 pages
File Size : 50,8 Mb
Release : 2013-10-06
Category : Business & Economics
ISBN : 9781498341714

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Key Aspects of Macroprudential Policy - Background Paper by International Monetary Fund. Fiscal Affairs Dept.,International Monetary Fund. Monetary and Capital Markets Department Pdf

The countercyclical capital buffer (CCB) was proposed by the Basel committee to increase the resilience of the banking sector to negative shocks. The interactions between banking sector losses and the real economy highlight the importance of building a capital buffer in periods when systemic risks are rising. Basel III introduces a framework for a time-varying capital buffer on top of the minimum capital requirement and another time-invariant buffer (the conservation buffer). The CCB aims to make banks more resilient against imbalances in credit markets and thereby enhance medium-term prospects of the economy—in good times when system-wide risks are growing, the regulators could impose the CCB which would help the banks to withstand losses in bad times.

Author : International Monetary Fund. Fiscal Affairs Dept.,International Monetary Fund. Strategy, Policy, & Review Department,International Monetary Fund. Monetary and Capital Markets Department
Publisher : International Monetary Fund
Page : 62 pages
File Size : 54,7 Mb
Release : 2013-10-06
Category : Business & Economics
ISBN : 9781498341707

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Key Aspects of Macroprudential Policy by International Monetary Fund. Fiscal Affairs Dept.,International Monetary Fund. Strategy, Policy, & Review Department,International Monetary Fund. Monetary and Capital Markets Department Pdf

The crisis has underscored the costs of systemic instability at both the national and the global levels and highlighted the need for dedicated macroprudential policies to achieve financial stability. Building on recent advances, this paper provides a framework to inform the IMF’s country-specific advice on macroprudential policy. It recognizes that developing macroprudential policy is a work in progress, and addresses key issues to help ensure its effectiveness.

Author : Mr.Stijn Claessens
Publisher : International Monetary Fund
Page : 38 pages
File Size : 40,5 Mb
Release : 2014-12-11
Category : Business & Economics
ISBN : 9781484358115

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An Overview of Macroprudential Policy Tools by Mr.Stijn Claessens Pdf

Macroprudential policies – caps on loan to value ratios, limits on credit growth and other balance sheets restrictions, (countercyclical) capital and reserve requirements and surcharges, and Pigouvian levies – have become part of the policy paradigm in emerging markets and advanced countries alike. But knowledge is still limited on these tools. Macroprudential policies ought to be motivated by market failures and externalities, but these can be hard to identify. They can also interact with various other policies, such as monetary and microprudential, raising coordination issues. Some countries, especially emerging markets, have used these tools and analyses suggest that some can reduce procyclicality and crisis risks. Yet, much remains to be studied, including tools’ costs ? by adversely affecting resource allocations; how to best adapt tools to country circumstances; and preferred institutional designs, including how to address political economy risks. As such, policy makers should move carefully in adopting tools.

Author : International Monetary Fund
Publisher : International Monetary Fund
Page : 45 pages
File Size : 46,7 Mb
Release : 2014-06-11
Category : Business & Economics
ISBN : 9781498342629

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Staff Guidance Note on Macroprudential Policy by International Monetary Fund Pdf

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

Author : Mr.F. Gulcin Ozkan,Ms.Filiz Unsal
Publisher : International Monetary Fund
Page : 34 pages
File Size : 40,5 Mb
Release : 2014-06-24
Category : Business & Economics
ISBN : 9781498375429

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On the use of Monetary and Macroprudential Policies for Small Open Economies by Mr.F. Gulcin Ozkan,Ms.Filiz Unsal Pdf

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.

Author : Ms.Aleksandra Zdzienicka,Ms.Sally Chen,Federico Diaz Kalan,Stefan Laseen,Katsiaryna Svirydzenka
Publisher : International Monetary Fund
Page : 29 pages
File Size : 48,7 Mb
Release : 2015-12-31
Category : Business & Economics
ISBN : 9781513534992

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Effects of Monetary and Macroprudential Policies on Financial Conditions by Ms.Aleksandra Zdzienicka,Ms.Sally Chen,Federico Diaz Kalan,Stefan Laseen,Katsiaryna Svirydzenka Pdf

The Global Financial Crisis has reopened discussions on the role of the monetary policy in preserving financial stability. Determining whether monetary policy affects financial variables domestically—especially compared to the effects of macroprudential policies— and across borders, is crucial in this context. This paper looks into these issues using U.S. exogenous monetary policy shocks and macroprudential policy measures. Estimates indicate that monetary policy shocks have significant and persistent effects on financial conditions and can attenuate long-term financial instability. In contrast, the impact of macroprudential policy measures is generally more immediate but shorter-lasting. Also, while an exogenous increase in U.S. monetary policy rates tends to reduce credit and house prices in other countries—with the effects varying with country-specific characteristics—an increase driven by improved U.S. economic conditions tends to have the opposite effect. Finally, we do not find evidence of cross-border spillover effects associated with U.S. macroprudential policies.

Author : International Monetary Fund. Monetary and Capital Markets Department
Publisher : International Monetary Fund
Page : 33 pages
File Size : 49,9 Mb
Release : 2011-03-14
Category : Business & Economics
ISBN : 9781498339179

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Macroprudential Policy - An Organizing Framework - Background Paper by International Monetary Fund. Monetary and Capital Markets Department Pdf

MCM conducted a survey in December 2010 to take stock of international experiences with financial stability and the evolving macroprudential policy framework. The survey was designed to seek information in three broad areas: the institutional setup for macroprudential policy, the analytical approach to systemic risk monitoring, and the macroprudential policy toolkit. The survey was sent to 63 countries and the European Central Bank (ECB), including all countries in the G-20 and those subject to mandatory Financial Sector Assessment Programs (FSAPs). The target list is designed to cover a broad range of jurisdictions in all regions, but more weight is given to economies that are systemically important (see Annex for details). The response rate is 80 percent. This note provides a summary of the survey’s main findings.

Author : Mr.Stijn Claessens,Swati R. Ghosh,MissRoxana Mihet
Publisher : International Monetary Fund
Page : 36 pages
File Size : 45,5 Mb
Release : 2014-08-19
Category : Business & Economics
ISBN : 9781498357609

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Macro-Prudential Policies to Mitigate Financial System Vulnerabilities by Mr.Stijn Claessens,Swati R. Ghosh,MissRoxana Mihet Pdf

Macro-prudential policies aimed at mitigating systemic financial risks have become part of the policy toolkit in many emerging markets and some advanced countries. Their effectiveness and efficacy are not well-known, however. Using panel data regressions, we analyze how changes in balance sheets of some 2,800 banks in 48 countries over 2000–2010 respond to specific macro-prudential policies. Controlling for endogeneity, we find that measures aimed at borrowers––caps on debt-to-income and loan-to-value ratios––and at financial institutions––limits on credit growth and foreign currency lending––are effective in reducing asset growth. Countercyclical buffers are little effective through the cycle, and some measures are even counterproductive during downswings, serving to aggravate declines, consistent with the ex-ante nature of macro-prudential tools.

Author : Aleksandra Zdzienicka (Ms)
Publisher : Unknown
Page : 128 pages
File Size : 51,9 Mb
Release : 2015
Category : Electronic
ISBN : 1513518720

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Effects of Monetary and Macroprudential Policies on Financial Conditions by Aleksandra Zdzienicka (Ms) Pdf

Author : Mr.Nicolas Arregui,Mr.Jaromir Benes,Mr.Ivo Krznar,Ms.Srobona Mitra,Mr.Andre Santos
Publisher : International Monetary Fund
Page : 73 pages
File Size : 42,7 Mb
Release : 2013-07-17
Category : Business & Economics
ISBN : 9781484335727

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Evaluating the Net Benefits of Macroprudential Policy by Mr.Nicolas Arregui,Mr.Jaromir Benes,Mr.Ivo Krznar,Ms.Srobona Mitra,Mr.Andre Santos Pdf

The paper proposes a simple, new, analytical framework for assessing the cost and benefits of macroprudential policies. It proposes a measure of net benefits in terms of parameters that can be estimated: the probability of crisis, the loss in output given crisis, policy effectiveness in bringing down both the probability and damage during crisis, and the output-cost of a policy decision. It discusses three types of policy leakages and identifies instruments that could best minimize the leakages. Some rules of thumb for policymakers are provided.

Author : Mr.Jerome Vandenbussche,Ms.Ursula Vogel,Ms.Enrica Detragiache
Publisher : International Monetary Fund
Page : 36 pages
File Size : 41,8 Mb
Release : 2012-12-27
Category : Business & Economics
ISBN : 9781475587449

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Macroprudential Policies and Housing Price by Mr.Jerome Vandenbussche,Ms.Ursula Vogel,Ms.Enrica Detragiache Pdf

Several countries in Central, Eastern and Southeastern Europe used a rich set of prudential instruments in response to last decade’s credit and housing boom and bust cycles. We collect detailed information on these policy measures in a comprehensive database covering 16 countries at a quarterly frequency. We use this database to investigate whether the policy measures had an impact on housing price inflation. Our evidence suggests that some—but not all—measures did have an impact. These measures were changes in the minimum CAR and non-standard liquidity measures (marginal reserve requirements on foreign funding, marginal reserve requirements linked to credit growth).

Author : Jacek Osinski,Katharine Seal,Mr.Lex Hoogduin
Publisher : International Monetary Fund
Page : 28 pages
File Size : 46,8 Mb
Release : 2013-06-21
Category : Business & Economics
ISBN : 9781484369999

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Macroprudential and Microprudential Policies by Jacek Osinski,Katharine Seal,Mr.Lex Hoogduin Pdf

Effective arrangements for micro and macroprudential policies to further overall financial stability are strongly desirable for all countries, emerging or advanced. Both policies complement each other, but there can also be potential areas of overlap and conflict, which can complicate this cooperation. Organizing their very close interactions can help contain these potential tensions. This note clarifies the essential features of macroprudential and microprudential policies and their interactions, and delineates their borderline. It proposes mechanisms for aligning both policies in the pursuit of financial stability by identifying those elements that are desirable for effective cooperation between them. The note provides general guidance. Actual arrangements will need take into account country-specific circumstances, reflecting the fact that that there is no “one size fits all.”

Author : Juan Pablo Medina Guzman,Mr.Jorge Roldos
Publisher : International Monetary Fund
Page : 44 pages
File Size : 50,5 Mb
Release : 2014-02-12
Category : Business & Economics
ISBN : 9781484302897

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Monetary and Macroprudential Policies to Manage Capital Flows by Juan Pablo Medina Guzman,Mr.Jorge Roldos Pdf

We study interactions between monetary and macroprudential policies in a model with nominal and financial frictions. The latter derive from a financial sector that provides credit and liquidity services that lead to a financial accelerator-cum-fire-sales amplification mechanism. In response to fluctuations in world interest rates, inflation targeting dominates standard Taylor rules, but leads to increased volatility in credit and asset prices. The use of a countercyclical macroprudential instrument in addition to the policy rate improves welfare and has important implications for the conduct of monetary policy. “Leaning against the wind” or augmenting a standard Taylor rule with an argument on credit growth may not be an effective policy response.