Dealing with the Challenges of Macro Financial Linkages in Emerging MarketsOtaviano Canuto, Swati Ghosh The 2008 financial crisis has highlighted the challenges associated with global financial integration and has emphasized the importance of macro financial linkages. Specifically it has shown how real (business cycles) can interact with and be amplified by the financial sector, resulting in high pro-cyclicality and a buildup of systemic risk in the financial sector that manifests itself during economic downturns. |
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advanced economies aggregate asset growth asset price booms balance sheet Bank for International Bank of Brazil Bank of Korea bank’s banking sector banking system Basel borrowing capital controls capital flows capital requirements Central Bank Challenges of Macro Claessens countercyclical countercyclical capital credit crunches credit growth crises Dealing debt deposits domestic banking domestic financial effects Emerging Markets Figure equity exchange rate external financial cycle financial firms financial institutions financial markets financial sector financial stability financial system foreign exchange framework FX liquidity Ghosh global financial crisis household housing prices increase inflation inflows interest rates International Monetary Fund lending leverage limits Linkages in Emerging liquidity ratio loans LTV and DTI Macro Financial Linkages macro prudential policies macro prudential regulation macroeconomic MaPP measures maturity micro monetary policy noncore liabilities percent portfolio procyclicality reduce regulatory reserve requirements risk-weighted Shin short-term spillovers systemic risk target tion volatility vulnerabilities World Bank