The interaction between macroprudential policy and financial stability

Research output: Working paper

3 Downloads

Abstract

In this paper, an index of domestic macroprudential policy tools is constructed and the effectiveness of these tools in controlling credit growth 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, and the paper also looks at a case study of Chile, Colombia, Japan, Portugal and the UK. Our main results find that the cumulative index of macroprudential policy tools does not have a statistically significant impact on credit growth when considering a panel of 27 EU countries. When considering the case of Japan, a tighter capital conservation buffer leads to a decrease in the credit supply. When looking at a panel of 7 Latin American countries, our main results show that a tightening of the capital conservation buffer results in an increase in the credit supply. A tightening of the loan-to-value ratio results in a decrease in the credit supply in the panel of 7 Latin American countries. Lastly, a tightening in the overall macroprudential policy tool stance results in a decrease in credit supply in Japan and an increase in credit supply in Portugal.
Original languageEnglish
Place of PublicationLisboa
PublisherREM - Research in Economics and Mathematics
Number of pages43
Publication statusPublished - Apr 2020
Externally publishedYes

Publication series

NameREM Working Paper
No.0123-2020
ISSN (Electronic)2184-108X

Keywords

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

Fingerprint

Dive into the research topics of 'The interaction between macroprudential policy and financial stability'. Together they form a unique fingerprint.

Cite this