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Adapting Macroprudential Policies to Global Liquidity Conditions

In: Capital Mobility and Monetary Policy

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  • Hyun Song Shin

    (Princeton University)

Abstract

This paper outlines an approach to macroprudential policy for open emerging economies that emphasizes banking sector balance sheet management as the key driver of risk premiums, capital flows and vulnerabilities to sudden reversals in global liquidity conditions. It argues for the usefulness of monitoring the "non-core liabilities" of the banking sector as a signal of lending standards and potential vulnerability of the financial system to shocks. The paper presents a taxonomy of macroprudential tools, ranging from orthodox tools of bank capital regulation to more novel "liabilities-side" tools, such as the levy on non-core liabilities recently introduced by the Korean Republic.
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Suggested Citation

  • Hyun Song Shin, 2014. "Adapting Macroprudential Policies to Global Liquidity Conditions," Central Banking, Analysis, and Economic Policies Book Series, in: Miguel Fuentes D. & Claudio E. Raddatz & Carmen M. Reinhart (ed.),Capital Mobility and Monetary Policy, edition 1, volume 18, chapter 2, pages 25-67, Central Bank of Chile.
    • Handle: RePEc:chb:bcchsb:v18c02pp25-67
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    Cited by:

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    2. Miguel Fuentes D. & Claudio E. Raddatz K. & Carmen María Reinhart., 2015. "Capital mobility and monetary policy: an overview," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 18(1), pages 50-66, April.
    3. Valentina Bruno & Hyun Song Shin, 2014. "Assessing Macroprudential Policies: Case of South Korea," Scandinavian Journal of Economics, Wiley Blackwell, vol. 116(1), pages 128-157, January.
    4. Idil Uz Akdogan, 2020. "The effects of macroprudential policies on managing capital flows," Empirical Economics, Springer, vol. 58(2), pages 583-603, February.

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