Macroprudential Policies and Current Account Balance

Ekinci, Mehmet Fatih (2020): Macroprudential Policies and Current Account Balance.

Abstract

Macroprudential policies have become essential tools for the policy makers in order to maintain financial stability. Effectiveness of these policies has been studied by a growing literature with an emphasis on the impact of the policies on target variables such as credit growth and asset price appreciations. In this paper, we investigate the impact of macroprudential policies on the current account balance considering the link between external imbalances and financial stability. Building on a standard empirical current account model, we show that usage of an additional macroprudential instrument is associated with an improvement in the current account balance. Moreover, our results indicate that positive impact of macroprudential policy measures on the current account balance is stronger in the deficit countries compared to the surplus countries.

• Item Type: MPRA Paper
• Language: English
• Keywords: Global Imbalances, Current Account Balance, Macroprudential Policies and Panel Data.
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C33 - Panel Data Models ; Spatio-temporal Models; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E58 - Central Banks and Their Policies; F - International Economics > F3 - International Finance > F32 - Current Account Adjustment ; Short-Term Capital Movements; G - Financial Economics > G1 - General Financial Markets > G18 - Government Policy and Regulation; G - Financial Economics > G2 - Financial Institutions and Services > G28 - Government Policy and Regulation

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