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Capital flows, bazookas and unconventional monetary policy: Essays in international financial stability

Frost, J. J., 2015, [Groningen]: University of Groningen, SOM research school. 188 p.

Research output: ThesisThesis fully internal (DIV)Academic

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  • Jonathon Jeffrey Frost
Do international capital flows make countries more or less vulnerable to financial crises? Should countries shield their economies from stress with capital controls? ‎Once a crisis hits, should the public sector launch large-scale support programs ("bazookas")? And if the central bank decides to launch new and unconventional monetary policies such as large-scale asset purchases, what effects can be expected?

These questions ‎form the inspiration for this dissertation in international financial stability. Using macroeconomic and financial data from a broad sample of advanced and emerging market economies over the past three decades, the research yields a number of new insights. For example, while foreign debt inflows can inflate credit bubbles and make banking crises more likely, it appears that a closed capital account has little benefit and may even increase the chance of currency crises. Meanwhile, under certain conditions, bazookas are effective in lowering the credit spreads of distressed borrowers even without actual use. While some central bank interventions (like the ECB Securities Markets Program) have had only short-term effects on bond yields, others (like Outright Monetary Transactions) have been much more effective. And in Japan, where the central bank has embarked on a particularly aggressive program of quantitative easing, unconventional monetary policy seems to have contributed to growing income inequality through its impact on asset prices.

Overall, these essays show that much can be learned from cross-country analysis. ‎The work is a small contribution to the larger search for policy to support a safer and more sustainable financial system.
Original languageEnglish
QualificationDoctor of Philosophy
Awarding Institution
Supervisors/Advisors
Award date15-Oct-2015
Place of Publication[Groningen]
Publisher
Print ISBNs978-90-367-8294-4
Electronic ISBNs978-90-367-8293-7
Publication statusPublished - 2015

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