In the face of spillovers: Prudential policies in emerging economies

We examine whether emerging market prudential policies help to reduce the macro-financial spillover effects of US monetary policy. find that markets with tighter face significantly smaller, and less negative, spillovers total credit from policy tightening shocks. Reserve requirements and, a lesser extent, loan-to-value ratio limits appear be particularly effective measures at mitigating Consistent bank-lending channel, our findings indicate domestic can dampen markets’ exposure associated global financial cycle, even when accounting for capital controls. These suggest they may useful tool in international macroeconomic trade-offs.