The Impact Of Macroprudential Policies On Extreme Cross-country Capital Movements

At present,China is deepening the financial reform and opening up and promoting the process of RMB internationalization.With the further opening of the financial markets,China will face larger and more volatile cross-country capital inflows and outflows.Macroprudential policy,as the international capital flow management tool,aims to prevent systemic risks and maintain financial stability.Therefore,exploring the effectiveness of macroprudential policies on extreme crosscountry capital movements is not only helpful to enrich the research in this field,but also of great significance for China to resist the impact of extreme cross-country capital movements and reduce the adverse impact of systemic risks at the present stage.Based on the data of macroprudential policies and extreme cross-country capital flow episodes of 50 economies from 2000q1 to 2020q3,this paper uses the logit model to empirically analyze the impact of macroprudential policies and classified macroprudential instruments on extreme cross-country capital movements.The results show that the implementation of macroprudential instruments effectively reduce the probability of capital stop and retrench episodes,and the effective varies with different types of macroprudential instruments.Financial intermedia-targeted instruments are more effective than borrower-targeted instruments and FIT can effectively reduce the probability of capital stop and retrench episodes.In addition,there are differences in the effect of macroprudential instruments on different sources of cross-country capital.In general,macroprudential policy tools can effectively reduce the probability of extreme capital flow episodes for foreign direct investment,portfolio debt and bank/other,but have no effectively impact on equity flows.Moreover,this paper further explores the differences in the impact of macroprudential policies on extreme cross-country capital movements under different exchange rate regimes,capital openness and financial development levels.The paper finds that macroprudential policies are more effective in reducing the occurrence of capital stop and retrench episodes under relatively fixed exchange rate regimes,higher capital openness and financial development level.Based on the above findings,this paper puts forward policy recommendations:improving the macroprudential regulatory framework and strengthening monitoring and supervision of cross-country capital movements;Deepening financial reform and promoting financial opening;Effectively identify cross-country capital from different sources and flexibly use various Macroprudential tools.