Macroprudential policy and capital flows

Margaret Davenport, Filipa Sá and Tomasz Wieladek

Chapter 9 in Research Handbook of Macroprudential Policy, 2026, pp 200-219 from Edward Elgar Publishing

Abstract: This chapter explores how macroprudential policy can reduce the risks associated with volatile capital inflows, particularly in housing markets. It reviews empirical evidence on the effectiveness of instruments such as loan-to-value and foreign exchange regulations in limiting credit booms and mitigating macro-financial vulnerabilities. Using cross-country panel data and identification strategies that address endogeneity, the chapter assesses how macroprudential tools influence both capital flow volatility and the transmission of global financial shocks. It highlights practical policy challenges, including regulatory leakages, cross-border spillovers, and limited tools for non-bank sectors, and proposes directions for enhancing macroprudential frameworks in an open economy context.

Keywords: Macroprudential policy; Capital flows; Financial stability; Housing markets; Policy spillovers (search for similar items in EconPapers)
Date: 2026
ISBN: 9781035306206
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