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№ 2017/2

Macroeconomics

KOZIUK Viktor ¹

¹West Ukrainian National University

The factor of resource richness in the implementation of macro-prudential policies

Ekon. teor. 2017; 2:50-68

https://doi.org/10.15407/etet2017.02.050

ABSTRACT ▼

The vulnerability of resource rich countries to trade shocks is further complicated due to capital flow reverses as drivers of macrofinancial instability. That opens the space for expanding the policy-mix tool-kit of macroprudential regulation that makes it possible to mitigate the conflict between price stability, exchange rates stability and financial stability, which is a challenge to efficient monetary policy. Hypothetically, the factor of resource richness could be a quite important motivator for intensifying the use of macroprudential regulation. This hypothesis is tested on a sample of 117 resource common countries and 38 resource rich countries. In first approximation this hypothesis looks valid taking into account the results of regression analysis. In the same time it looks paradoxical that transition to macroprudential regulation is corresponded with exchange rate flexibility and the mean macroprudential policy index in the group of inflation targeting countries is somewhat higher than in the resourcerich countries. It is possible to explain such a paradox by the heterogeneity of commodity exporting countries as to the combination of policy regime and the nature of macroeconomic adjustment that together reflect the institutional format of rent distribution. Grouping resourcerich countries by “policy regime – exchange rate regime” allows to identify the following three modalities of macroprudential policy: The first one reflects the development of countercyclical instruments outside the commodity factor of the procyclicality of financial system; the second one represents a continuation of the policy of capital flow regulation; and the third one is a way to maintain stability and control over the financial system. The first modality is used in mature democracies with flexible ex-change rate. The second one is characteristic for – in the nonmature democracies with rigid exchange rate regimes. And the third one – in the autocracies with a strong role of sovereign wealth funds as a counter-cyclical tool. It is concluded that commodity factor of financial instability in Ukraine should be in the focus of further development of the macroprudential toolkit.

Keywords: macro-prudential policy, commodity economy, financial stability, capital flows, external shocks.

JEL: E58, E59, O23, Q33

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