IMF Working Papers

Macroprudential Policies and Capital Controls Over Financial Cycles

By Maria Arakelyan, Adam Gersl, Martin Schindler

August 25, 2023

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Format: Chicago

Maria Arakelyan, Adam Gersl, and Martin Schindler. Macroprudential Policies and Capital Controls Over Financial Cycles, (USA: International Monetary Fund, 2023) accessed November 15, 2024

Disclaimer: 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.

Summary

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.

Subject: Balance of payments, Capital controls, Capital inflows, Credit booms, Financial sector policy and analysis, Macroprudential policy, Macroprudential policy instruments, Money

Keywords: Boom episode, Capital control measure, Capital controls, Capital inflows, Credit booms, Credit bust, Credit cycles, Credit growth, Financial stability, Global, Macroprudential measures, Macroprudential policy, Macroprudential policy instruments, Net policy tightening

Publication Details

  • Pages:

    45

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2023/171

  • Stock No:

    WPIEA2023171

  • ISBN:

    9798400248757

  • ISSN:

    1018-5941

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