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Author Cordella, Tito
Title Reserve Requirements in the Brave New Macroprudential World
Imprint Herndon : World Bank Publications, 2014
©2014
book jacket
Descript 1 online resource (69 pages)
text txt rdacontent
computer c rdamedia
online resource cr rdacarrier
Series World Bank Studies
World Bank Studies
Note Front Cover -- Title Page -- Copyright Page -- Contents -- Preface -- Acknowledgments -- About the Authors -- Abbreviations -- Executive Summary -- Chapter 1 Introduction -- Chapter 2 Stylized Facts -- Which Countries Have Used Reserve Requirements as a Macroeconomic Stabilization Tool? -- What Have Been the Cyclical Properties of RR as a Macroeconomic Stabilization Tool? -- How Is RRP Related to the Credit Cycle? -- What Is the Relation between RRP and Monetary Policy? -- How Does Foreign Exchange Market Intervention Fit into the Picture? -- Chapter 3 An Illustration of Policy Responses for Four Latin American Countries -- Chapter 4 Policy Rationale -- The Need for a Second Instrument -- Why Do RR Often Serve as the Second Instrument? -- Which Country Characteristics Explain Different Policy Mixes? -- Chapter 5 Microprudential Effects of Business Cycle Management -- Tradeoffs over the Business Cycle -- Chapter 6 Policy Tensions and Tradeoffs -- Chapter 7 Policy Conclusions -- Bibliography -- Boxes -- Figures -- Tables -- Back Cover
In the aftermath of the global financial crisis, it is hard to find any macroeconomic policy report that does not include some reference to financial stability or systemic risk and the resulting need for "macroprudential policies." While there is a large and growing literature on macroprudential policies and financial stability, less attention has been paid to how macroprudential policies may facilitate macroeconomic stabilization in the presence of large capital flows. To fill such a gap, this report looks at the use of reserve requirements (RR) as a macroprudential tool. Its findings should be of particular interest to emerging market economists and policymakers that are faced with difficult questions regarding how to cope effectively with volatile capital flows. The analysis builds upon a new dataset on quarterly RR covering a large number of industrial and developing countries for the period 1970-2011. It finds that while no industrial country has resorted to active RR policy since 2004, almost half of developing countries have. Indeed, together with interest rates adjustments and forex interventions, RR seem to be an important component of a trio of policy instruments that developing countries have relied upon to navigate through the boom-bust cycles driven by capital flows. The ultimate reason for resorting to RR lies essentially on the procyclical behavior of the exchange rate over the business cycle in developing countries (with the currency depreciating in bad times and appreciating in good times) that complicates enormously the use of interest rates as a countercyclical instrument. Under such circumstances, RR are an effective instrument that can be used countercyclically when concerns about the effects of interest rates on the exchange rate become paramount. Finally, the report suggests that while, from a macroprudential point of view,
the most common macroprudential instruments are equivalent, from a microprudential one they are not. Conflicts may thus arise between the micro- and macro-prudential policy stances. In addition, the overall design of macroprudential policies should follow a careful analysis of the role that different financial frictions play in various environments since similar symptoms can reflect very different underlying forces
Description based on publisher supplied metadata and other sources
Electronic reproduction. Ann Arbor, Michigan : ProQuest Ebook Central, 2020. Available via World Wide Web. Access may be limited to ProQuest Ebook Central affiliated libraries
Link Print version: Cordella, Tito Reserve Requirements in the Brave New Macroprudential World Herndon : World Bank Publications,c2014 9781464802126
Subject Money supply.;Monetary policy.;Capital movements.;Foreign exchange rates.;Business cycles
Electronic books
Alt Author Federico, Pablo
Vegh, Carlos
Vuletin, Guillermo
Cordella, Tito
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