ABSTRACT
We analyse how macroprudential policies in a panel of emerging economies affect spillovers from changes in long-term government bond yields in the United States. We show that a tightening in foreign exchange (FX) related macroprudential policy tools, in particular, limits to FX positions, helps to temporarily shield emerging economies from interest rate spillovers. No such effect is observed for non-FX related macroprudential actions.
Acknowledgments
We thank Luiz Pereira da Silva, Elod Takats and Christian Upper for useful discussions. The views expressed are those of the authors and not necessarily those of the Bank for International Settlements.
Disclosure statement
No potential conflict of interest was reported by the author(s).
Notes
1 The EMEs are Brazil, Chile, China, Colombia, the Czech Republic, Hong Kong SAR, Hungary, India, Indonesia, Israel, Korea, Malaysia, Mexico, Peru, the Philippines, Poland, Russia, Singapore, South Africa, Thailand and Turkey.
2 The composite indicator of domestically focused macroprudential measures includes the countercyclical capital buffer; the capital conservation buffer; broad-based, household-targeted and corporate sector-targeted capital buffers, leverage limits, loan-loss provisioning requirements, broad-based, household-targeted and corporate sector-targeted limits on credit growth; loan restrictions; loan-to-value ratios; debt-service-to-income ratios; taxes and levies for specified transactions; liquidity-related measures; measures related to systemically important financial institutions; and ‘other’ macroprudential measures.
3 We do not include exchange rates, as they respond endogenously to the other variables included in EquationEquation (1)(1) (1) .
4 First differences (in percentage points) are taken for both variables. See also Mehrotra, Moessner, and Shu (Citation2019).
5 The coefficients on these control variables are available upon request.