Microsoft Word Thesis Gent (1). doc
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21 Figure 5. Capital Flows to Emerging Markets Sources: IMF, International Financial Statistics; Haver Analytics; and IMF staff estimates. Since the global financial market is still not stable, there should be set new policy priorities. As the balance sheet leverage is quite high and its reconstruction is in slow process the IMF suggests that the balance sheet repair is essential to take place faster. While at the same time the regulatory reforms are important to help the financial sector be on a sounder footing. Indeed, the fiscal and monetary stimulus, help mitigate the problems in short term, thus for longer term the policy should foresee structural solutions to these problems in different scenarios. Thus, the government should construct the capital structures carefully to best fit the problems of their country in order to have financial stability, (IMF, 2011). The countries hit by the crises, specifically the European ones, should focus more in improving the interaction of sovereign and bank sector. It is important that the government of these countries influence the markets that it is possible that their debt maturity will get longer, while the reliance on rollovers will decrease. Even though, several countries are in this process it will take time to be fulfilled and for the market to be convinced, while the impact could be different on each country, (IMF, 2011). 22 However, in order to be more specific, it is important to distinguish the intervention measures in advanced and emerging market economies. Before the 2007-08 crises, central banks (CBs) in advanced economies have “implemented monetary policy by guiding a single short-term interest rate (IMF, 2010, p. 3).” Nonetheless, the same report shows that to recover from the crisis, CBs lowered interest rates, such as the Bank of Canada (BoC) keeping overnight rates at 0.5 percent, while the Fed in US has also integrated similar policies, (IMF, 2010). Furthermore, many of the central banks in advanced economies have switched to balance sheet policies, some of which are: a) Systemic liquidity easing (intended to enhance liquidity and ease liquidity deficits in financial markets); b) Purchase of long- term public sector securities (their aim is to cut longer-term interest rates and lessen stress in longer-term credit markets which will also increase the level of CB reserves); c) Purchase of private sector securities (intended to increase credit in financial markets); and d) Foreign exchange liquidity provision (which aims foreign exchange liquidity injection in “the form of sales of foreign reserves or foreign exchange swaps or other derivatives” which increases both sides of the CB’s balance sheet, (IMF, 2010, p. 4-6). Download 1.76 Mb. Do'stlaringiz bilan baham: |
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