Randomized trial evaluates macroprudential policy coordination effects on financial outcomes in systemic economies, suggesting feasible international cooperation.
Key Points
This research aims to assess the effectiveness and feasibility of synchronized macroprudential policies compared to country-specific approaches in managing financial risk.
Developed a common macroprudential policy index (CMPI) to measure cross-country coordination.
Utilized Dynamic Common Correlated Effects (DCCE) model and Panel Structural VAR (PSVAR) analyses.
Examined impacts on capital flows, credit growth, and house prices across advanced and middle-income economies.
In the long run, both domestic macroprudential policy (MPI) and coordinated macroprudential policy (CMPI) show contractionary effects on capital flows.
Synchronized macroprudential policies temporarily increase capital flows, credit, and house prices, highlighting short-term benefits.
Effective coordination is feasible but requires flexibility to cater to diverse national financial conditions.