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Padamja Khandelwal, Ezequiel Cabezon, Mr. Sanan Mirzayev, and Rayah Al-Farah

D. Liquidity Tools E. Tools to Reduce Risks from Dollarization F. Other Tools G. Response to COVID-19 Crisis Annex 1. The Credit-to-GDP Gap and Credit Cycle Analysis Methodology Annex 2. Systemic Financial Crises in the CCA Annex 3. Macroprudential Tools Deployed in the CCA Countries, June 2020 References BOXES Box 1. Capital Inflow Reversals in CCA Countries Box 2. Macroprudential Response to COVID-19 FIGURES Figure 1. Characteristics of CCA Economies Figure 2. Tourism and Capital Flows in the CCA Figure 3. Banking Sector Indicators

Padamja Khandelwal, Ezequiel Cabezon, Mr. Sanan Mirzayev, and Rayah Al-Farah
Limited economic diversification has made the economies of the Caucasus and Central Asia particularly vulnerable to external shocks. The economies in the region are heavily reliant on oil and mining exports as well as remittances. In some countries, tourism and capital flows also play a prominent role in aggregate economic activity.
Padamja Khandelwal, Ezequiel Cabezon, Mr. Sanan Mirzayev, and Rayah Al-Farah

. Liquidity Tools The calibration and design of liquidity tools should reflect underlying risks in the system and allow the release of buffers during periods of financial stress. Banks in Armenia, Georgia, Kazakhstan, and Uzbekistan have greater access to international wholesale funding relative to other CCA economies, and liquidity buffers also need to shelter these countries from potential capital flow reversals. 13 Liquidity requirements should also take into consideration the ability of the central bank to provide liquidity during periods of stress, the depth of

International Monetary Fund
This note covers considerations that can guide the staff’s policy advice on the use of a broad range of macroprudential tools. It discusses the transmission and likely effectiveness of these tools in mitigating systemic risks and the set of indicators that can be used in surveillance to assess the need for changes in macroprudential policy settings. This note is a supplement to the Staff Guidance Note on Macroprudential Policy.
International Monetary Fund

be needed. An example is the cap on FX derivatives positions of foreign bank branches applied in Korea . 151. Staff should be mindful of potential side effects of liquidity tools . ( IMF, 2010b ; IMF, 2011d ) Liquidity tools can excessively restrict banks’ ability to undertake maturity transformation, reducing the efficiency of the banking system in providing financial intermediation. Alternatively, they can limit the ability of interbank money markets to act as a buffer in helping institutions manage short-term liquidity needs, unintentionally undermining