Policy Instruments to Lean Against the Wind in Latin America

Policy Instruments to Lean Against the Wind in Latin America

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This paper reviews policy tools that have been used and/or are available for policy makers in the region to lean against the wind and review relevant country experiences using them. The instruments examined include: (i) capital requirements, dynamic provisioning, and leverage ratios; (ii) liquidity requirements; (iii) debt-to-income ratios; (iv) loan-to-value ratios; (v) reserve requirements on bank liabilities (deposits and nondeposits); (vi) instruments to manage and limit systemic foreign exchange risk; and, finally, (vii) reserve requirements or taxes on capital inflows. Although the instruments analyzed are mainly microprudential in nature, appropriately calibrated over the financial cycle they may serve for macroprudential purposes.Accordingly, to discourage home equity-financed consumption and promote larger buffers against any housing downturns, ... As a complementary measure, the minimum DTI criterion was also tighteneda€”to qualify for mortgage insurance, ... Canada: House Price Inflation (percent) 20 yearon year 15 15 3m on 3m annualized 20 -10 -10 2005 - Jan 2006 - Jan 2007 ... boom, the government will also withdraw its existing insurance backing on non-amortizing home equity lines of credit.

Title:Policy Instruments to Lean Against the Wind in Latin America
Author: International Monetary Fund
Publisher:International Monetary Fund - 2011-07-01

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