Discussion Paper Series 2014-E-1

Macroprudential Policies in a Global Perspective

Olivier Jeanne

This paper analyzes the case for the international coordination of macroprudential policies in the context of a simple theoretical framework. Both domestic macroprudential policies and prudential capital controls have international spillovers through their impact on capital flows. The uncoordinated use of macroprudential policies may lead to a “capital war” that depresses global interest rates. International coordination of macroprudential policies is not warranted, however, unless there is unemployment in some countries. There is scope for Pareto-improving international policy coordination when one part of the world is in a liquidity trap while the rest of the world accumulates reserves for prudential reasons.

Keywords: Macroprudential Policy; Capital Flows; Capital Controls; International Reserves; International Coordination; Liquidity Trap


Views expressed in the paper are those of the authors and do not necessarily reflect those of the Bank of Japan or Institute for Monetary and Economic Studies.

Copyright © 2014 Bank of Japan All Rights Reserved.

Home Japanese Home