Policy Responses in Small Economies to Stability Challenges from Cross-Border Financial Integrationcross-border financial integration

Már Gudmundsson ()
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Már Gudmundsson: University of Iceland

A chapter in Fault Lines After COVID-19, 2023, pp 227-246 from Springer

Abstract: Abstract Már Gudmundsson analyses the risks to macroeconomic and financial stability arising from cross-border financial integration in small, open and financially integrated economies (SOFIEs). The optimal policy response includes structural reforms and resilience. As the risks derive partly from swings in global financial conditions and there are limits to market depth in SOFIEs, such reforms are not enough. For most emerging market economies and some of the smaller advanced economies, there will still be a need for additional stabilisation tools and an integrated policy framework (IPF) around them. These are the tools of macroprudential policy, foreign exchange intervention and capital flow management measures. IMF advice to SOFIEs has evolved in the right direction, but there are still questions about the consistency of its institutional view with IPF.

Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-031-26482-5_14

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DOI: 10.1007/978-3-031-26482-5_14

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