The effectiveness of macro-prudential policies in the face of global uncertainty –the role of exchange-rate regimes

Taniya Ghosh and Shakti Kumar

Finance Research Letters, 2022, vol. 46, issue PA

Abstract: The paper analyses the effects of world uncertainty on the level of domestic credit growth rate and the role of macro-prudential policies (Mapps) in mitigating these effects in a panel of 33 countries under different exchange rate regimes. A higher level of world uncertainty decreases the level of domestic credit under both fixed- and flexible-exchange rate regimes, but these spill-over effects are higher for countries with fixed-exchange rate regimes. The Mapps have a significant impact on financial conditions and help to achieve long-term financial stability, but only for countries under the flexible-exchange regime. It remains completely ineffective for the fixed-exchange economies.

Keywords: Global uncertainty; Macro-prudential policy; Exchange-rate regime; Financial stability; World uncertainty index; Global economic policy uncertainty (search for similar items in EconPapers)
JEL-codes: E42 E58 G18 G28 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:46:y:2022:i:pa:s1544612321003627

DOI: 10.1016/j.frl.2021.102358

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