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Macroprudential Policies and Capital Controls Over Financial Cycles
Author: Maria Arakelyan1, Adam Gersl, and Mr. Martin Schindler
  • 1 0000000404811396https://isni.org/isni/0000000404811396International Monetary Fund
Series:
IMF Working Papers
Volume/Issue:
Volume 2023: Issue 171
Language:
English
Publication Date:
25 Aug 2023
DOI:
https://doi.org/10.5089/9798400248757.001
ISBN:
9798400248757
ISSN:
1018-5941
Pages:
45
Keywords:
Macroprudential measures; capital controls; financial stability; credit cycles; capital control measure; credit bust; Net policy tightening; credit growth; boom episode; Credit booms; Macroprudential policy; Macroprudential policy instruments; Capital inflows; Global
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund