The impact of macroprudential policies on the transmission of shocks across financially integrated countries
| dc.contributor.author | Intungane, Doriane | |
| dc.date.accessioned | 2023-04-25T16:27:13Z | |
| dc.date.available | 2023-04-25T16:27:13Z | |
| dc.date.issued | 2022 | |
| dc.description.abstract | We study the implications of macroprudential policies across countries on the transmission of shocks when international investment activities are allowed. In a two-country dynamic stochastic general equilibrium (DSGE) model in which international investors are borrowing constrained and pledge international assets, we introduce a time-varying loan-to-value (LTV) ratio that adjusts to the variation of three different financial vulnerability indicators. We examine the effect of these policies on negative productivity and borrowing capacity shocks. Although time-varying LTV ratios reduce the international propagation of the productivity shock, their response to the shock depends on the financial vulnerability indicator with which the LTV ratio changes. With a productivity shock, the adjustment of the LTV ratio to the deviation of credit or asset price helps to reverse the negative impact of the shock. With a financial shock, LTV ratios varying with a deviation of credit-to-GDP ratio or aggregate credit can mitigate the impact of a negative financial shock. Adjustment of the LTV ratios reduces the fluctuation of international investors' balance sheets, investment, and productivity. We find that countries improve their welfare when time-varying LTV ratios are in place. The magnitude of the welfare gain differs with both the financial vulnerability indicator and the shock. | |
| dc.description.uri | https://library.macewan.ca/cgi-bin/SFX/url.pl/DSK | |
| dc.identifier.citation | Intungane, D. (2022). The impact of macroprudential policies on the transmission of shocks across financially integrated countries. Review of International Economics, 1–25. https://doi.org/10.1111/roie.12625 | |
| dc.identifier.doi | https://doi.org/10.1111/roie.12625 | |
| dc.identifier.uri | https://hdl.handle.net/20.500.14078/3076 | |
| dc.language.iso | en | |
| dc.rights | All Rights Reserved | |
| dc.subject | business fluctuations | |
| dc.subject | macroprudential policy | |
| dc.subject | international policy coordination and transmission | |
| dc.subject | international investment | |
| dc.title | The impact of macroprudential policies on the transmission of shocks across financially integrated countries | |
| dc.type | Article |