Reciprocity can curb macro-prudential ‘leakages’ – BIS paper
But gains can be small, which may explain limited use of reciprocity to date, authors say
A policy of reciprocating macro-prudential policies can improve welfare by limiting “leakages”, research published by the Bank for International Settlements finds.
Pierre-Richard Agénor, Timothy Jackson and Luiz Awazu Pereira da Silva say there has been little theoretical work on spillovers from macro-prudential policy, a gap they set out to fill. In the working paper, they outline a two-region, “core-periphery” structural model with financial frictions to study spillovers and the potential
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