02586cas a2200337 a 4500 AALejournalIMF022346 230101c9999 xx r poo 0 0eng d 5.00 USD 9781513584492 1018-5941 BD-DhAAL BD-DhAAL Cecchetti, Stephen. Addressing Spillovers from Prolonged U.S. Monetary Policy Easing / Stephen Cecchetti, Machiko Narita, Umang Rawat, Ratna Sahay. Washington, D.C. : International Monetary Fund, 2021. 1 online resource (37 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students There is growing recognition that prolonged monetary policy easing of major economies can have extraterritorial spillovers, driving up financial system leverage in other countries. When faced with such a rise of threats to financial stability, what can countries do? Specifically, is there a role for macroprudential tools, capital controls or foreign exchange intervention in safeguarding financial stability from risks arising externally? We examine the efficacy of these policy interventions by exploring whether preemptive or reactive policy interventions can mitigate such risks. Using a sample of 950 bank and nonbank financial firms across 28 non-U.S. economies over the past two decades, we show that if policymakers are able to implement policies prior to an additional consecutive decline in U.S. interest rates, financial institutions do not increase their leverage by as much as they otherwise would. By contrast, it is more difficult to counter the spillovers with reactive policy interventions. In practice, however, policymakers need to remain cautious about the timing of preventative tightening, especially when their economies face large negative shocks such as a pandemic. Mode of access: Internet Banks imf Central Banks and Their Policies imf Depository Institutions imf Micro Finance Institutions imf Monetary Policy imf Narita, Machiko. Rawat, Umang. Sahay, Ratna. IMF Working Papers; Working Paper ; No. 2021/182 Full text available on IMF http://elibrary.imf.org/view/journals/001/2021/182/001.2021.issue-182-en.xml IMF e-Library