The global financial cycle, monetary policies and macroprudential regulations in small, open economies / by Gregory Bauer ... [et al.]. : FB3-5/2016-38E-PDF

This paper analyzes the implications of the global financial cycle for conventional and unconventional monetary policies and macroprudential policy in small, open economies such as Canada. The paper starts by summarizing recent work on financial cycles and their growing correlation across borders. The resulting global financial cycle may be followed by a financial crisis that is quite costly. The cycle causes time variation in global risk premia in fixed income, equity and foreign exchange markets. In turn, time-varying global risk premia affect the transmission mechanisms of both conventional and unconventional monetary policies in small, open economies. While there are large costs associated with financial crises, the paper summarizes new work showing that the central banks’ leaning against the effects of the global financial cycle would typically be too costly. The paper concludes with some suggestions for the formation of macroprudential policies that are designed to offset the financial imbalances that grow during the boom phase of the cycle.

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publications.gc.ca/pub?id=9.822632&sl=1

Renseignements sur la publication
Ministère/Organisme Bank of Canada.
Titre The global financial cycle, monetary policies and macroprudential regulations in small, open economies / by Gregory Bauer ... [et al.].
Titre de la série Staff Working Paper, 1701-9397 ; 2016-38
Type de publication Série - Voir l'enregistrement principal
Langue [Anglais]
Format Électronique
Document électronique
Note(s) August 2016.
Includes bibliographical references.
Information sur la publication [Ottawa] : Bank of Canada, c2016.
Description ii, 31 p. : graphs.
Numéro de catalogue
  • FB3-5/2016-38E-PDF
Descripteurs Monetary policy
International markets
Economic analysis
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