Macro-financial stability frameworks: experience and challenges

Claudio Borio, Ilhyock Shim and Hyun Song Shin

No 1057, BIS Working Papers from Bank for International Settlements

Abstract: Since the 2008–9 Great Financial Crisis, major advanced economies (AEs) have used monetary and macroprudential policies to achieve macroeconomic and financial stability. Emerging market economies (EMEs) have, in addition, combined interest rate tools with FX intervention, macroprudential policy and, sometimes, capital flow management measures (CFMs) to address the challenges from capital flow and exchange rate volatility. This paper provides an overview of the use of monetary, macroprudential and exchange rate policies, sometimes alongside CFMs, both in AEs and EMEs. It also assesses the extent to which the use of these policies constitutes a holistic macro-financial stability framework (MFSF). We reach three conclusions. First, combining tools has succeeded in improving policy trade-offs, notably by mitigating the risks to domestic stability arising from external influences. Second, a holistic MFSF is still a work in progress. Finally, more efforts need to be made to better understand the channels of international spillovers and spillbacks.

Keywords: capital flow; exchange rate policy; macro-financial stability framework; macroprudential measure; monetary policy (search for similar items in EconPapers)
JEL-codes: E44 E52 F38 G28 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2022-12
New Economics Papers: this item is included in nep-cba, nep-fdg, nep-mon and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Chapter: Macro-Financial Stability Frameworks: Experience and Challenges (2023)
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