Macroprudential policy under uncertainty

Research output: Contribution to journalArticlepeer-review

Abstract

In this paper, an index of domestic macroprudential policy tools is constructed and the effectiveness of these tools in controlling credit growth, managing GDP growth and steadying inflation is studied using a dynamic panel data model for the period between 2000 and 2017. The empirical analysis includes two panels namely an EU panel of 27 countries and a Latin American panel of 7 countries, the paper also looks at a case study of Japan, Portugal and the UK. Our main results show that a tighter overall macroprudential policy stance would result in lower credit growth as well as lower GDP growth while, a tighter overall macroprudential policy tool stance would lead to higher inflation in the majority of cases. Factors such as capital openness and the perception of global market risk play an important role in both the exigency of policy implementation as well as the success thereof.

Original languageEnglish
Pages (from-to)161-209
Number of pages49
JournalPortuguese Economic Journal
Volume21
Issue number2
DOIs
Publication statusPublished - May 2022
Externally publishedYes

Keywords

  • Capital flows
  • Credit booms
  • EU
  • Financial stability
  • Latin America
  • Macroprudential policy
  • Systematic risk

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