TY - BOOK ID - 84544156 TI - Capital Inflows, Exchange Rate Flexibility, and Credit Booms AU - Magud, Nicolas. AU - Reinhart, Carmen. AU - Vesperoni, Esteban. AU - International Monetary Fund. PY - 2012 SN - 1463942362 1463942354 1463936427 1463942346 PB - Washington, D.C. : International Monetary Fund, DB - UniCat KW - Capital movements KW - Foreign exchange rates KW - Monetary policy KW - Exports and Imports KW - Foreign Exchange KW - Money and Monetary Policy KW - Financial Markets and the Macroeconomy KW - Monetary Policy KW - International Monetary Arrangements and Institutions KW - International Lending and Debt Problems KW - International Investment KW - Long-term Capital Movements KW - Monetary Policy, Central Banking, and the Supply of Money and Credit: General KW - Monetary Systems KW - Standards KW - Regimes KW - Government and the Monetary System KW - Payment Systems KW - Currency KW - Foreign exchange KW - International economics KW - Monetary economics KW - Capital inflows KW - Exchange rate arrangements KW - Exchange rate flexibility KW - Domestic credit KW - Currencies KW - Balance of payments KW - Money KW - Credit KW - United States UR - https://www.unicat.be/uniCat?func=search&query=sysid:84544156 AB - The prospects of expansionary monetary policies in the advanced countries for the foreseeable future have renewed the debate over policy options to cope with large capital inflows that are, at least partly, driven by low interest rates in the financial centers. Historically, capital flow bonanzas have often fueled sharp credit expansions in advanced and emerging market economies alike. Focusing primarily on emerging markets, we analyze the impact of exchange rate flexibility on credit markets during periods of large capital inflows. We show that bank credit grows more rapidly and its composition tilts to foreign currency in economies with less flexible exchange rate regimes, and that these results are not explained entirely by the fact that the latter attract more capital inflows than economies with more flexible regimes. Our findings thus suggest countries with less flexible exchange rate regimes may stand to benefit the most from regulatory policies that reduce banks' incentives to tap external markets and to lend/borrow in foreign currency; these policies include marginal reserve requirements on foreign lending, currency-dependent liquidity requirements, and higher capital requirement and/or dynamic provisioning on foreign exchange loans. ER -