Managing Elevated Risk

Iwan Azis has been teaching at Cornell University since 1992. He was also Director of Graduate Study at the Regional Science Program and adjunct professor at the Johnson Graduate School of Management before he took a leave to head the Asian Development Bank’s Office of Regional Economic Integration (OREI). His main research interest is on macro-financial economics and regional economic modeling. He obtained his Bachelor in economics from the University of Indonesia (1976); Ph.D (1982) and Master’s degree (1981) in Regional Science and Economics from Cornell University. Hyun Song Shin took up the position of Economic Adviser and Head of Research at the BIS on 1 May 2014. Before joining the BIS, Mr. Shin was the Hughes-Rogers Professor of Economics at Princeton University. In 2010, on leave from Princeton, he served as Senior Adviser to the Korean president, taking a leading role in formulating financial stability policy in Korea and developing the agenda for the G20 during Korea's presidency. From 2000 to 2005, he was Professor of Finance at the London School of Economics. He holds a DPhil and MPhil in Economics from Oxford University (Nuffield College) and a BA in Philosophy, Politics and Economics from the same university.

Contents.- Foreword.- Chapter 1: Introduction and Overview.- Chapter 2: The Three Phases of Global Liquidity.- 2.1: Conceptual and Measurement Issues.- 2.2: First Phase of Global Liquidity.- 2.2.1: Round-trip Bank Flows to the US.- 2.2.2: Banking Sector Flows to the Rest of the World.- 2.2.3: Exchange Rates and Leverage.- 2.3: Second Phase of Global Liquidity.- 2.4: The Case of Emerging Asia.- 2.5: Third Phase and Onward.- 2.6: References.- Chapter 3: Early Warning Indicators for Financial Vulnerabilities.- 3.1: Principles for Selection of Early Warning Indicators.- 3.2: Core and Noncore Liabilities.- 3.3: References.- Chapter 4: Emerging Asia’s Noncore Liabilities and Policy Effectiveness.- 4.1: Bank-led Flows, Noncore Liabilities, and Credit Growth.- 4.2: Reassessing Monetary Policy.- 4.3: Appendix.- 4.4: References.- Chapter 5: Capital Flows and Income Distribution.- 5.1: National Policy Remains Key.- 5.2: How Capital Flows Affect Income Inequality.- 5.3: Prioritization for a Multi-Objective Goal.- 5.4: Appendix.- 5.5: References.- Chapter 6: Policy Implications.- 6.1 Tailoring Policies to Vulnerabilities.- 6.2 Macroprudential Tools.- 6.2.1 Bank Capital-Oriented Tools.- 6.2.1.1 Capital Requirements that Adjust Over the Cycle.- 6.2.1.2 Forward-Looking Provisioning.- 6.2.1.3: Leverage caps.- 6.2.1.4: Loan-To-Value and Debt-Service-To-Income Caps.- 6.2.1.5: Loan-to-Deposit caps.- 6.2.1.6: Levy on Noncore Liabilities.- 6.2.1.7: Unremunerated Reserve Requirements.- 6.2.2: Relative Merits of URR versus Levies/Taxes.- 6.2.3: Relationship with other Stabilization Policies.- 6.3: Financial Integration and Institutional Design.- 6.4: Policy Choices.- 6.5: References.-