ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846
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Using Macro-prudential Tools

Dampening the Global Risk Appetite Cycle

International capital flows come in only two modes: feast or famine. The policy response to both situations has been primarily via exchange and capital controls--both have their consequences. Macro-prudential tools may represent a more flexible, less discriminatory alternative to capital controls. These tools of macroeconomic policy, though already in place, are not used as they should be, that is, to directly address the risk-appetite cycle of international capital.



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