Macroprudential Policy In The Wake Of The Covid-19 Crisis: International Spillovers And Coordination Issues

Banks are key for the transmission of many monetary, fiscal and regulatory measures that have been taken to dampen the economic consequences of the Covid-19 crisis. This article reviews evidence on the international spillovers of macroprudential policies, focusing on the transmission through bank credit flows and how this varies depending on the characteristics of banking organisations. While authorities reacted to the common negative economic shock with fairly symmetric policy responses, asymmetric speeds of recovery across countries and sectors may imply asymmetric normalisation of policy. At that stage, long-standing questions about the international spillovers of monetary policy, fiscal policy and macroprudential measures, and the case for coordinating such measures, will take on renewed relevance. Global banks can generate positive spillovers and support the recovery in the locations they serve. Some features of global banks, such as their capitalisation and credit provision to borrowers, require particular attention during the economic recovery phase. Cross-country coordination arguments may find support if international spillovers weaken the ability of countries to recover from the Covid-19 crisis.