Managing the Tide: How Do Emerging Markets Respond to Capital Flows?

Ghosh, Atish R.; Ostry, Jonathan D.; Qureshi, Mahvash S.

doi:10.5089/9781475589207.001

Cited by 62 publications

(56 citation statements)

References 26 publications

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“…During this period, some countries, especially those receiving large capital inflows, employed macroprudential policies to contain credit expansion and financial sector risks. As the global crisis took hold, macroprudential instruments were used to support credit and economic recovery (Ghosh et al, 2017).…”

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confidence: 99%

Household Credit, Global Financial Cycle, and Macroprudential Policies: Credit Register Evidence from an Emerging Country

et al. 2017

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We analyze the effects of macroprudential policies on local bank credit cycles and their interactions with international financial conditions. To this end, we exploit the comprehensive credit register containing all bank loans to individuals in Romania, a small open economy subject to external shocks.Our sample period from 2004 until 2012 covers a full boom-bust credit cycle during which a wide range of macroprudential measures were deployed. Our results show that tighter macroprudential conditions are associated with a significant decline in household credit, with substantially stronger effects for FX loans than for local currency loans. The effects on FX loans are higher for: (i) ex-ante riskier borrowers proxied by higher debt-service-to-income ratios and (ii) banks with greater reliance on foreign funding. Furthermore, tighter macroprudential policy has stronger dampening effects on FX lending when global risk appetite is high and foreign monetary policy is expansionary. Quantitative effects are in general larger for borrower rather than lender macroprudential policies. Overall, the results suggest that macroprudential policies are effective in mitigating bank risk-taking in household lending over the local bank credit and global financial cycles and have important implications for theory and policy. . We are grateful for useful comments and suggestions from

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confidence: 99%

Household Credit, Global Financial Cycle, and Macroprudential Policies: Credit Register Evidence from an Emerging Country

et al. 2017

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“…Finally, in more recent studies, Ghosh et al . () examine how emerging market economies respond to capital inflows using quarterly data over the period 2005–2013, and they show that intervention in the foreign exchange market to resist currency appreciation pressures is one of their possible policy tools. In the same way, Fratzscher et al .…”

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confidence: 99%

Do Exchange Rate Shocks Have Asymmetric Effects on Reserve Accumulation? Evidence from Emerging Markets*

Chen

Lin

2019

Scandinavian J Economics

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It is generally argued that central banks in emerging market countries, motivated by a desire to defend export competitiveness, tend to intervene in foreign exchange markets to limit currency appreciations rather than depreciations. Using panel data from 13 emerging market countries for the period 1998:M1 to 2016:M12, we find that exchange rate shocks play an important role in determining the accumulation of international reserves. Moreover, we find evidence that central banks in emerging markets tend to follow a “leaning against the depreciation wind” policy, rather than the appreciation wind (i.e., we provide evidence of a “fear of depreciation”).

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“…4 Jeanne and Korinek (2010) and Bianchi (2011) showed that there are pecuniary 2. For details, see, for example, Jongwanich and Kohpaiboon (2012), Ahmed and Zlate (2014), Forbes et al (2016), and Ghosh, Ostry, and Qureshi (2017).…”

Section: Introductionmentioning

confidence: 99%

“…For details, see, for example, Jongwanich and Kohpaiboon (), Ahmed and Zlate (), Forbes et al (), and Ghosh, Ostry, and Qureshi ().…”

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Capital Controls, Monetary Policy, and Balance Sheets in a Small Open Economy

Kitano

Takaku

2017

Economic Inquiry

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We develop a small open economy, New Keynesian model that incorporates a financial accelerator in combination with liability dollarization. Applying a Ramsey‐type analysis, we compare the welfare implications of an optimal monetary policy under flexible exchange rates and an optimal capital control policy under fixed exchange rates. In an economy without the financial accelerator, an optimal monetary policy under flexible exchange rates is superior to an optimal capital control policy under fixed exchange rates. In contrast, in an economy with the financial accelerator, an optimal capital control under fixed exchange rates yields higher welfare than an optimal monetary policy under flexible exchange rates.(JEL E44, E52, F32, F38, F41)

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Managing the Tide: How Do Emerging Markets Respond to Capital Flows?

Cited by 62 publications

References 26 publications

Household Credit, Global Financial Cycle, and Macroprudential Policies: Credit Register Evidence from an Emerging Country

Household Credit, Global Financial Cycle, and Macroprudential Policies: Credit Register Evidence from an Emerging Country

Do Exchange Rate Shocks Have Asymmetric Effects on Reserve Accumulation? Evidence from Emerging Markets*

Capital Controls, Monetary Policy, and Balance Sheets in a Small Open Economy

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