Financial spillovers, spillbacks, and the scope for international macroprudential policy coordination

This paper discusses the scope for international macroprudential policy coordination in a financially integrated world economy. It begins with a review of the transmission channels associated with, and the empirical evidence on, financial spillovers and spillbacks. Limitations of the existing literature are also identified. The potential gains associated with cross-border macroprudential coordination, dwelling on both recent analytical contributions and quantitative studies based on multi-country models with financial frictions, are then evaluated. The issue of whether coordination of macroprudential policies simultaneously requires some degree of monetary policy coordination is also discussed. The analysis focuses on the potential for policy coordination between major advanced economies and a group identified as systemically-important middle-income countries (SMICs). Next, practical ways to promote international macroprudential policy coordination are considered. Following a discussion of Basel III’s Principle of reciprocity and ways to improve it, the paper advocates a further strengthening of the current statistical, empirical and analytical work conducted by international financial institutions to evaluate, and raise awareness of, the gains from international coordination of macroprudential policies.

Fiscal and monetary instruments of impact on economic development

The research subject includes the theoretical basis and mechanism of fiscal and monetary policy coordination. The study aims to justify the conceptual basis of fiscal- monetary policy interactions to ensure economic development. Methods. To achieve the appropriate tasks, we used a set of methods and approaches that helped ensure our investigation's conceptual unity. The systemic and structural approaches, analysis and synthesis methods, comparison, generalization, modeling, and scientific abstraction are applied. Results. In this paper, we improved the theoretical and methodological foundations of fiscal and monetary policy coordination. The author highlighted the necessity to use the institutional approach in that case. Also, we gave practical proposals to develop the system for assessing the effectiveness of the coordination of fiscal and monetary policy. Practical implications. Government economic policy and instruments of its implementation. Conclusions. Empirical experience has shown the advisability of fiscal and monetary policy coordination to ensure sustainable endogenous economic growth. Coordination of government financial policy measures in the context of the economic cycle stages should be based on an institutional approach. The interaction of fiscal and monetary policies should focus on increasing social welfare and the maintenance of long-term macroeconomic stability. The adaptive interaction of monetary and fiscal mechanisms and the improvement of the state's economic system's institutional architectonics contribute to the intensification of business entities' economic activity. Meanwhile, those factors positively influence on economy's competitiveness. The necessity of introducing a system for assessing the effectiveness of the coordination of fiscal and monetary policy determines effective measures of financial regulation at a certain stage of economic development.

The EMU-REER Spillovers on Southeastern European Economies: A G-VAR Model

In this paper, we empirically investigate the spillovers of Real Effective Exchange rate of European Monetary Union (EMU-REER) on Industrial Production, Real Effective Exchange rate, Foreign Reserves and interest rates for the South Eastern European (SEE) economies of Bulgaria, Croatia, Greece, North Macedonia, Romania, and Slovenia, using monthly data over 2002–2016. In a global vector autoregressive framework with EMU-REER as a global variable, we show that the EMU variable has a lasting impact on the SEE variables and economies. Specifically, we provide strong evidence that this impact of EMU-REER is not only of a greater importance compared to the importance of the domestic variables, but also that it negatively affects the competitive stance of the investigated SEE economies, which is partly compensated by the lower interest rates that certain SEE countries face in return. Our results offer potential policy implications with respect to monetary policy coordination and discretion.