Macroprudential Policies and Capital Controls Over Financial Cycles
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Summary:
In this paper we assess the effectiveness of macroprudential policies and capital controls in supporting financial stability. We construct a large and granular dataset on prudential and capital flow management measures covering 53 countries during 1996-2016. Conditional on a credit boom, we study the impact of these policy measures on the probability of the credit boom ending in a bust. Our analysis suggests that macroprudential tools are effective from this perspective. If credit booms are accompanied by capital flow surges, in addition to macroprudential tools, capital controls on money market instruments including cross-border interbank lending tend to contribute to reducing the likelihood of a credit bust.
Series:
Working Paper No. 2023/171
Subject:
Balance of payments Capital controls Capital inflows Credit booms Financial sector policy and analysis Macroprudential policy Macroprudential policy instruments Money
Frequency:
regular
English
Publication Date:
August 25, 2023
ISBN/ISSN:
9798400248757/1018-5941
Stock No:
WPIEA2023171
Format:
Paper
Pages:
45
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