Macro-prudential policies aimed at mitigating systemic financial risks have become part of the policy toolkit in many emerging markets and some advanced countries. Their effectiveness and efficacy are not well-known, however. Using panel data regressions, we analyze how changes in balance sheets of some 2, 800 banks in 48 countries over 2000a2010 respond to specific macro-prudential policies. Controlling for endogeneity, we find that measures aimed at borrowersaacaps on debt-to-income and loan-to-value ratiosaaand at financial institutionsaalimits on credit growth and foreign currency lendingaaare effective in reducing asset growth. Countercyclical buffers are little effective through the cycle, and some measures are even counterproductive during downswings, serving to aggravate declines, consistent with the ex-ante nature of macro-prudential tools.I. INTRODUCTION This paper analyzes the use of macro-prudential policies aimed at reducing vulnerabilities in banking systems. Recent events ... To help guide the use of macro-prudential policies, this paper asks the following three questions. ... Since during booms measured risks (specifically avalue at riska) tends to decline, banks are then more likely to expand lending AcInternational Monetary Fund.
|Title||:||Macro-Prudential Policies to Mitigate Financial System Vulnerabilities|
|Author||:||Stijn Claessens, Swati R. Ghosh, Miss Roxana Mihet|
|Publisher||:||International Monetary Fund - 2014-08-19|