Macro-pru beats monetary policy for open-economy financial stability
Monetary policy especially blunt in countries that rely on foreign borrowing
Macro-prudential policies do a better job of promoting financial stability in open emerging market economies, which borrow a lot from abroad, according to a working paper published this week by the International Monetary Fund.
In On the use of Monetary and Macroprudential Policies for Small Open Economies, Gulcin Ozkan of York University in the UK and the IMF's Filiz Unsal use an open economy framework, which allows them to take into account external channels, including the exchange rate, when
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