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The Global Financial Cycle, Monetary Policies, and Macroprudential Regulations in Small, Open Economies

Author

Listed:
  • Gregory Bauer
  • Gurnain Pasricha
  • Rodrigo Sekkel
  • Yaz Terajima

Abstract

This article analyzes the implications of the global financial cycle for conventional and unconventional monetary policies and macroprudential policy in small, open economies such as Canada's. The article starts by summarizing recent work on global financial cycles. These cycles cause time variation in global risk premia, which affects the transmission mechanisms of both conventional and unconventional monetary policies in small, open economies. The article then summarizes new work showing that the central banks' leaning against the effects of the global financial cycle would typically be too costly. The article concludes with some suggestions for the formation of macroprudential policies.

Suggested Citation

  • Gregory Bauer & Gurnain Pasricha & Rodrigo Sekkel & Yaz Terajima, 2018. "The Global Financial Cycle, Monetary Policies, and Macroprudential Regulations in Small, Open Economies," Canadian Public Policy, University of Toronto Press, vol. 44(2), pages 81-99, June.
    • Handle: RePEc:cpp:issued:v:44:y:2018:i:2:p:81-99
    DOI: 10.3138/cpp.2017-018
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    Citations

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    Cited by:

    1. Łukasz Kurowski & Paweł Smaga, 2018. "Monetary Policy and Cyclical Systemic Risk - Friends or Foes?," Prague Economic Papers, Prague University of Economics and Business, vol. 2018(5), pages 522-540.
    2. Hassan Dargahi & Mehdi Hadian, 2022. "Oil shocks, financial stability and implementing macroeconomics and macro‐prudential policies in an oil‐exporting economy," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(2), pages 2481-2496, April.
    3. Scheubel, Beatrice & Stracca, Livio & Tille, Cédric, 2019. "The global financial cycle and capital flow episodes: a wobbly link?," Working Paper Series 2337, European Central Bank.
    4. Xing Zhang & Fengchao Li & Zhen Li & Yingying Xu, 2018. "Macroprudential Policy, Credit Cycle, and Bank Risk-Taking," Sustainability, MDPI, vol. 10(10), pages 1-18, October.
    5. repec:prg:jnlpep:v:preprint:id:667:p:1-19 is not listed on IDEAS
    6. Mundra, Sruti & Bicchal, Motilal, 2024. "Financial cycle comovement with monetary and macroprudential policy and global factors: Evidence from India," The North American Journal of Economics and Finance, Elsevier, vol. 71(C).
    7. Kurowski, Łukasz & Rogowicz, Karol, 2018. "Are business and credit cycles synchronised internally or externally?," Economic Modelling, Elsevier, vol. 74(C), pages 124-141.
    8. Patrik Kupkovic & Martin Suster, 2020. "Identifying the Financial Cycle in Slovakia," Working and Discussion Papers WP 2/2020, Research Department, National Bank of Slovakia.

    More about this item

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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