Leaning Against the Wind: Macroprudential Policy in Asia

February 6, 2014

Preview Citation

Format: Chicago

Longmei Zhang, and Edda Zoli. Leaning Against the Wind: Macroprudential Policy in Asia, (USA: International Monetary Fund, 2014) accessed December 3, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

In recent years, macroprudential policy has become an increasingly active policy area. Many countries have adopted it as a tool to safeguard financial stability, in particular to deal with the credit and asset price cycles driven by global capital flows. This paper reviews the use of key macroprudential instruments and capital flow measures in 13 Asian economies and 33 economies in other regions since 2000, and constructs various macroprudential policy indices, aggregating sub-indices on key instruments. Asian economies appear to have made greater use of macroprudential tools, especially housing-related measures, than their counterparts in other regions. The effects of macroprudential policy are then assessed through an event study, cross-country macro panel regressions and bank-level micro panel regressions. The analysis suggests that macroprudential policy and capital flow measures have helped curb housing price growth, equity flows, credit growth, and bank leverage. The instruments that have been particularly effective in this regard include loan-to-value ratio caps, housing tax measures, and foreign currency-related measures.

Subject: Balance of payments, Capital flow management, Capital flows, Credit, Financial sector policy and analysis, Housing prices, Macroprudential policy, Money, Prices

Keywords: Asia and Pacific, Asia subsample, Asset price cycle, Capital flow management, Capital flow measures, Capital flows, CFM index, CFM stance indices, Credit, Credit growth, Credit growth equation, Credit supply response, Dependent variable, Foreign currency, Global, Housing price, Housing price growth, Housing prices, Interaction term Rr, Interest rate, Macroprudential policy, Monetary policy indicator, Money market, Panel regression, Simple average, Transmission mechanism, WP

Publication Details

Pages:

37
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2014/022
Stock No:

WPIEA2014022
ISBN:

9781475572476
ISSN:

1018-5941

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