Impairment of monetary policy independence by global financial cycles and the mitigating role of macroprudential policies

Vrinda Gupta and Amlendu Dubey

Applied Economics, 2024, vol. 56, issue 44, 5249-5262

Abstract: In this paper, we study the impairment in monetary policy caused by different forms of global financial cycles. We find that while both equity inflows and outflows cycles do exert influence over monetary policy, the bond inflows cycle does not have a significant impact. Further, we discuss the role of macroprudential policies in mitigating this impairment by using Difference-in-Difference with heterogeneous treatment effects which is robust to presence of heterogeneity across both time periods and groups. We find that FX-based policies such as Capital Restrictions on Foreign Exchange positions and Limits on Foreign Exposure alongside SIFIs and Loan Loss Provisioning are effective in reducing the impairment.

Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/00036846.2023.2244250 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:applec:v:56:y:2024:i:44:p:5249-5262

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20

DOI: 10.1080/00036846.2023.2244250

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().