In the Face of Spillovers: Prudential Policies in Emerging Economies

Coman, Andra; Lloyd, Simon

doi:10.2139/ssrn.3460538

Cited by 12 publications

(10 citation statements)

References 39 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…The authors also find that prudential policies, when not interacted with volatility, are insignificant. Relatedly, Coman and Lloyd (2019) find that emerging market economies' macroprudential policy can reduce the impact of US monetary policy (typically considered a 'push'-type factor) on capital flows to these economies. These findings align with our results in Figure 8, which shows the interaction term is significant at the centre of the capital flows distribution (right panel), while policy without the interaction term is not (left panel).…”

Section: Macroprudential Policymentioning

confidence: 99%

Capital Flows-at-Risk: Push, Pull and the Role of Policy

et al. 2020

View full text Add to dashboard Cite

We characterise the probability distribution of capital flows for a panel of emerging market economies conditional on information contained in financial asset prices, with a focus on 'tail' events. Our framework, based on the quantile regression methodology, allows for a separate role of push and pull-type factors, and offers insights into the term-structure of these effects. We find that both push and pull factors have heterogeneous effects across the distribution of capital flows, with the strongest reactions in the left tail. Also, the effect of changes in pull factors is more persistent than that of push factors. Finally, we explore the role of policy, and find that macroprudential and capital flow management measures are associated with changes in the distribution of capital flows.

show abstract

Section: Macroprudential Policymentioning

confidence: 99%

Capital Flows-at-Risk: Push, Pull and the Role of Policy

et al. 2020

View full text Add to dashboard Cite

show abstract

“…Prudential policy can be used as an additional tool to balance these trade‐offs, by potentially shielding countries from the global financial cycle and reducing their sensitivity to global shocks, as discussed for instance in Bruno and Shin (2015), Takáts and Temesvary (2019) and Coman and Lloyd (2019). Extending Bruno and Shin (2015) and Rey (2015), Cao and Dinger (2018) find empirically that monetary policy in small‐open economies may be limited by global financial flows, especially during monetary tightening; thus, implying a need for prudential measures to “lend a hand” to monetary policy in containing credit booms.…”

Section: Literaturementioning

confidence: 99%

“…The literature on the interaction between monetary and prudential policies is relatively scarce, and mostly focuses on the interaction of domestic policies, without a cross‐border angle; exceptions are Avdjiev et al (2017) and Coman and Lloyd (2019).…”

Section: Literaturementioning

confidence: 99%

The interaction between macroprudential policy and monetary policy: Overview

Bussière

Cao²,

Haan

et al. 2020

Rev International Economics

Self Cite

View full text Add to dashboard Cite

This paper presents the main findings of an International Banking Research Network initiative examining the interaction between monetary policy and macroprudential policy in determining international bank lending. We give an overview on the data, empirical specifications and results of the seven papers from the initiative. The papers are from a range of core and smaller advanced economies, and emerging markets . The main findings are as follows. First, there is evidence that macroprudential policy in recipient countries can partly offset the spillover effects of monetary policy conducted in core countries. Meanwhile, domestic macroprudential policy in core countries can also affect the cross‐border transmission of domestic monetary policy via lending abroad, by limiting the increase in lending by less strongly capitalized banks. Second, the findings highlight that studying heterogeneities across banks provides complementary insights to studies using more aggregate data and focusing on average effects. In particular, we find that individual bank characteristics such as bank size or GSIB status play a first‐order role in the transmission of these policies. Finally, the impacts differ considerably across prudential policy instruments, which also suggests the importance of more granular analysis.

show abstract

“…To account for lags in the setting of prudential policies and their persistent effects on the financial sector, we cumulate prudential policy actions over a 2‐year period. As in Coman and Lloyd (2019), who use the Cerutti et al. (2017) data in a similar manner this choice balances a trade‐off.…”

Section: Data and Empirical Frameworkmentioning

confidence: 99%

“…Some papers focus on specific prudential policy instruments or countries (e.g., Bruno & Shin, 2014; De Jonghe et al., 2020; de Marco & Wieladek, 2016; Forbes et al., 2017), while more systematic global analyses have a different scope to ours. For instance, Bremus and Fratszcher (2015) focus on syndicated loans, Takats and Temesvary (2019) only assess prudential policy interactions in response to the 2013 taper tantrum, and Coman and Lloyd (2019) assess how macro‐financial outcomes in emerging markets can be insulated against US monetary spillovers by domestic prudential policies.…”

Section: Introductionmentioning

confidence: 99%

Le Pont de Londres: Interactions between monetary and prudential policies in cross‐border lending

Bussière

Hills

Lloyd

et al. 2020

Rev International Economics

Self Cite

View full text Add to dashboard Cite

We examine how euro area (EA) monetary policy and recipient-country prudential policy interact to influence cross-border lending of French banks. We find that monetary spillovers via cross-border lending can be partially offset by prudential measures in receiving countries. We then explore heterogeneities, specifically by bank size and location of the affiliate (French HQ vs. affiliates based in the UK). We find that the response of lending from French HQ to EA monetary policy is less sensitive to recipient-country prudential policy for systemic banks (GSIBs) than for non-GSIBs'. In contrast, the response of lending from GSIBs' affiliates in the UK is sensitive to recipient-country prudential policy. French GSIBs' crossborder lending from French HQ responds differently than lending from international financial centres. We also find evidence that French GSIBs channel funds towards the UK in response to EA monetary policy, in a manner dampened by global prudential policy setting. These findings suggest the existence of a 'London Bridge': conditional on EA monetary policy, French GSIBs adjust their funds in the UK depending on global prudential policies and, from there, lend to third-party countries according to local prudential policies. Finally, we have similar findings for all EA-owned banks UK affiliates, suggesting a broader relevance for the London Bridge.

show abstract

In the Face of Spillovers: Prudential Policies in Emerging Economies

Cited by 12 publications

References 39 publications

Capital Flows-at-Risk: Push, Pull and the Role of Policy

Capital Flows-at-Risk: Push, Pull and the Role of Policy

The interaction between macroprudential policy and monetary policy: Overview

Le Pont de Londres: Interactions between monetary and prudential policies in cross‐border lending

Contact Info

Product

Resources

About