Leaning Against the Wind: Macroprudential Policy in Asia

 
Author/Editor: Longmei Zhang ; Edda Zoli
 
Publication Date: February 06, 2014
 
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
 
Summary: In recent years, macroprudential policy has become an increasingly active policy area. Many countries have adopted it as a tool to safeguard financial stability, in particular to deal with the credit and asset price cycles driven by global capital flows. This paper reviews the use of key macroprudential instruments and capital flow measures in 13 Asian economies and 33 economies in other regions since 2000, and constructs various macroprudential policy indices, aggregating sub-indices on key instruments. Asian economies appear to have made greater use of macroprudential tools, especially housing-related measures, than their counterparts in other regions. The effects of macroprudential policy are then assessed through an event study, cross-country macro panel regressions and bank-level micro panel regressions. The analysis suggests that macroprudential policy and capital flow measures have helped curb housing price growth, equity flows, credit growth, and bank leverage. The instruments that have been particularly effective in this regard include loan-to-value ratio caps, housing tax measures, and foreign currency-related measures.
 
Series: Working Paper No. 14/22
Subject(s): Macroprudential Policy | Asia | Capital flows | Credit expansion | Asset prices | Inflation | Business cycles | Monetary policy

 
English
Publication Date: February 06, 2014
ISBN/ISSN: 9781475572476/1018-5941 Format: Paper
Stock No: WPIEA2014022 Pages: 37
Price:
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