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Policymaking from a "macroprudential" perspective in emerging market economies


  • Ramon Moreno


Recurrent capital inflows pose important challenges for authorities in emerging market economies seeking to preserve financial stability. Raising interest rates to dampen imbalances that could arise from capital flows can also attract more capital inflows and accentuate appreciation pressures. For this reason authorities have used a number of instruments to mitigate the effects of capital flows, all with financial stability implications. Many of these instruments (eg reserve requirements) may have been used for other purposes but the global financial crisis has raised interest in examining them from a financial stability, or "macroprudential" perspective. This paper reviews some of these instruments, drawing in part on material provided by central banks to the BIS. The instruments include foreign exchange market intervention and foreign reserve accumulation; measures to strengthen bank balance sheets and capital and measures to maintain the quality of credit or to ifnluence credit growth or allocation, and capital controls. Certain implementation issues are also discussed, including signals to respond to, timing of prudential measures and procyclicality and effectiveness and calibration. An unresolved question is how the instruments described are to be used in conjunction with interest rate policy. Over the medium term, these instruments raise concerns because they may impair the development of the financial system.

Suggested Citation

  • Ramon Moreno, 2011. "Policymaking from a "macroprudential" perspective in emerging market economies," BIS Working Papers 336, Bank for International Settlements.
  • Handle: RePEc:bis:biswps:336

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    References listed on IDEAS

    1. Hernando Vargas Herrera & Yanneth R Betancourt & Carlos Varela & Norberto Rodriguez, 2011. "Effects of reserve requirements in an inflation targeting regime: the case of Colombia," BIS Papers chapters,in: Bank for International Settlements (ed.), The global crisis and financial intermediation in emerging market economies, volume 54, pages 133-169 Bank for International Settlements.
    2. Celine Gauthier & Alfred Lehar & Moez Souissi, 2010. "Macroprudential Regulation and Systemic Capital Requirements," Staff Working Papers 10-4, Bank of Canada.
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    Cited by:

    1. Christian Glocker & Pascal Towbin, 2012. "Reserve Requirements for Price and Financial Stability: When Are They Effective?," International Journal of Central Banking, International Journal of Central Banking, vol. 8(1), pages 65-114, March.
    2. Choy, Marylin & Chang, Giancarlo, 2014. "Medidas macroprudenciales aplicadas en el Perú," Revista Estudios Económicos, Banco Central de Reserva del Perú, issue 27, pages 25-50.
    3. World Bank, 2011. "Global Economic Prospects, Volume 3, June 2011 : Maintaining Progress Amid Turmoil
      [Perspectivas económicas mundiales junio de 2011 : mantener los advances en medio de la inestabilidad (Vol. 3)]
      ," World Bank Publications, The World Bank, number 12103.
    4. Ren, Haocong, 2011. "Countercyclical financial regulation," Policy Research Working Paper Series 5823, The World Bank.
    5. Malgorzata Olszak, 2012. "Macroprudential policy - aim, instruments and institutional architecture (Polityka ostroznosciowa w ujêciu makro - cel, instrumenty i architektura instytucjonalna)," Problemy Zarzadzania, University of Warsaw, Faculty of Management, vol. 10(39), pages 7-32.
    6. William R. White, 2014. "The Prudential Regulation of Financial Institutions: Why Regulatory Responses to the Crisis Might Not Prove Sufficient," OECD Economics Department Working Papers 1108, OECD Publishing.
    7. Gabriele Galati & Richhild Moessner, 2014. "What do we know about the effects of macroprudential policy?," DNB Working Papers 440, Netherlands Central Bank, Research Department.
    8. Jan Frait & Zlatuse Komarkova, 2011. "Financial Stability, Systemic Risk and Macroprudential Policy," Occasional Publications - Chapters in Edited Volumes,in: CNB Financial Stability Report 2010/2011, chapter 0, pages 96-111 Czech National Bank, Research Department.
    9. Hamed Ghiaie, 2018. "Shadow Bank run: The Story of a Recession," THEMA Working Papers 2018-01, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    10. Serge Jeanneau, 2011. "Central bank governance and financial stability: issues of potential relevance to Africa," BIS Papers chapters,in: Bank for International Settlements (ed.), Central banking in Africa: prospects in a changing world, volume 56, pages 21-36 Bank for International Settlements.
    11. repec:wbk:wbpubs:12098 is not listed on IDEAS
    12. Manuela Moschella, 2015. "Currency wars in the advanced world: Resisting appreciation at a time of change in central banking monetary consensus," Review of International Political Economy, Taylor & Francis Journals, vol. 22(1), pages 134-161, February.

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    capital flows; monetary policy; macroprudential;

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