Financial Spillovers and Macroprudential Policies
We estimate the impact of the extensity of macroprudential policies on the correlation of the policy interest rates between the center economies (CEs, i.e., the U.S., Japan, and the Euro area), and the peripheral economies (PHs). We find a more extensive implementation of macroprudential policies would lead PHs to (re)gain monetary independence from the CEs when the CEs implement expansionary monetary policy; when PHs run current account deficit; when they hold lower levels of international reserves; when their financial markets are relatively closed; when they are experiencing an increase in net portfolio flows; and when they are experiencing credit expansion.
The financial support of faculty research funds of University of Southern California, the University of Wisconsin, Madison, and Portland State University is gratefully acknowledged. We would like to thank the discussant Juanyi Xu, conference participants for the ADBI-JMCB Conference “Globalization and Economic Stability,” the European Systemic Risk Board, the Banque de France, Bundesbank, Isha Agarwal, Gabriele Galati, Linda Goldberg, Shang-Jin Wei, and anonymous referees for useful comments. All remaining errors are ours. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Joshua Aizenman & Menzie D. Chinn & Hiro Ito, 2020. "Financial Spillovers and Macroprudential Policies," Open Economies Review, vol 31(3), pages 529-563. citation courtesy of