DP9875 Macroprudential Policies in a Global Perspective
| Author(s): | Olivier Jeanne |
| Publication Date: | March 2014 |
| Keyword(s): | Capital Controls, Capital Flows, International Policy Coordination, International Reserves, Liquidity Trap, Macroprudential Policy |
| JEL(s): | F36, F41, F42 |
| Programme Areas: | International Macroeconomics |
| Link to this Page: | cepr.org/active/publications/discussion_papers/dp.php?dpno=9875 |
This paper analyzes the case for the international coordination of macroprudential policies in the context of a simple theoretical framework. Both domestic macroprudential policies and prudential capital controls have international spillovers through their impact on capital flows. The uncoordinated use of macroprudential policies may lead to a "capital war" that depresses global interest rates. International coordination of macroprudential policies is not warranted, however, unless there is unemployment in some countries. There is scope for Pareto-improving international policy coordination when one part of the world is in a liquidity trap while the rest of the world accumulates reserves for prudential reasons.