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International Monetary Fund. Monetary and Capital Markets Department
Ireland is a small open economy that is part of a monetary union and has a major financial system. Within the Euro Area (EA), Ireland comprises a relatively small proportion of aggregate GDP (3.4 percent), of which a significant portion is attributable to foreign-owned multinational enterprises (MNEs). Yet, the Irish financial system holds assets of EUR 7.9 trillion, over 18 times GDP. Since monetary policy is carried out by the European Central Bank (ECB) for the entire EA, macroprudential policy has the potential to play a critical stabilizing role for the Irish financial system.
International Monetary Fund. European Dept.

The Greek banking system has been healing but needs stronger resilience. Following the extended period of private sector deleveraging, signals are emerging that households are releveraging and that imbalances are building up in the real estate market. Indicators reflecting structural vulnerabilities point to a dominant role played by the highly concentrated but weakly capitalized banking system. It would therefore be important to enhance the macroprudential policy toolkit that is solely composed of CCoB and O-SII buffers, with the CCyB never activated. The methodologies underpinning the CCyB and O-SII buffer rate determination should initially be revised, which would set the stage for preparing a conditions-based roadmap to guide the activation of the CCyB and possibly enhancement of the O-SII buffers over the medium term. Reflecting the build-up of vulnerabilities in the real estate market, it would also be important to prepare a conditions-based roadmap to guide the activation of borrower-based measures over the medium term. Further work should focus on calibration of the macroprudential policy toolkit.

International Monetary Fund. Asia and Pacific Dept
Hong Kong SAR’s economy is recovering strongly as ample policy space has allowed the enaction of swift and bold policy responses to address the unprecedented crisis emanating from multiple shocks, including notably the pandemic. But the recovery remains uneven, with private consumption lagging, owing, in part, to a zero- COVID tolerance approach. The financial sector has remained resilient supported by significant buffers, strong institutional frameworks, and a well-functioning Linked Exchange Rate System (LERS). Increasing financial linkages with Mainland China bring both opportunities and challenges for growth and financial stability.
International Monetary Fund. Asia and Pacific Dept

1. Hong Kong SAR is a services-oriented small open economy that relies heavily on the free flow of capital, goods, and people.1 About 90 percent of GDP and employment come from the services sector. Financial services, trade and logistics, and hospitality services, which are underpinned mainly by the free flow of capital, goods, and people, respectively, account for about half of output and employment. Other services, including professional, real estate, IT/telecommunications, and public services, account for the remaining 40 percent of GDP.2

International Monetary Fund. Monetary and Capital Markets Department
The institutional framework for Macroprudential Policies (MaPP) in the Hong Kong Special Administrative Region (the Hong Kong SAR) is well established. According to the Basic Law, the Government of the Hong Kong SAR shall on its own formulate monetary and financial policies. The Financial Secretary (FS) and the Secretary for Financial Services and the Treasury (SFST) are responsible for policies for maintaining the stability and integrity of the financial system of the Hong Kong SAR. The Hong Kong SAR has a sector-based regulatory structure and the responsibilities and tools for safeguarding financial stability are spread across the Financial Services and the Treasury Bureau (FSTB) and three regulators (namely, the Hong Kong Monetary Authority (HKMA), Securities and Futures Commission (SFC) and Insurance Authority (IA)). There are good and well-structured interagency coordination and consultation mechanisms, through the Council of Financial Regulators (CFR) and the Financial Stability Committee (FSC), chaired by the FS and the SFST, respectively. Broad coordination between the CFR and government agencies on taxation and housing supply-side policies has also worked well. MaPP and risk assessment are communicated to the public openly and frequently through speeches, press releases and regular publications, including the Half-Yearly Monetary and Financial Stability Report of the HKMA and the Half-yearly Review Report of the Global and Local Securities Markets of the SFC.
Ms. Sally Chen and Katsiaryna Svirydzenka
Can the upturns and downturns in financial variables serve as early warning indicators of banking crises? Using data from 59 advanced and emerging economies, we show that financial overheating can be detected in real time. Equity prices and output gap are the best leading indicators in advanced markets; in emerging markets, these are equity and property prices and credit gap. Moreover, aggregating this information flags financial crisis many years before the crisis. Lastly, we find that the length of financial cycles is of medium-term frequency, calling into question the longer frequency widely used in the estimation of countercyclical capital buffers.
Manasa Patnam, Ms. Adina Popescu, Mr. Fabian Valencia, and Weijia Yao
This paper builds a novel database on the effects of macroprudential policy drawing from 58 empirical studies, comprising over 6,000 results on a wide range of instruments and outcome variables. It encompasses information on statistical significance, standardized magnitudes, and other characteristics of the estimates. Using meta-analysis techniques, the paper estimates average effects to find i) statistically significant effects on credit, but with considerable heterogeneity across instruments; ii) weaker and more imprecise effects on house prices; iii) quantitatively stronger effects in emerging markets and among studies using micro-level data; and iii) statistically significant evidence of leakages and spillovers. Other findings include relatively stronger impacts for tightening than loosening actions and negative effects on economic activity in the near term.