Macroprudential Policy Effects

Author : International Monetary Fund. Fiscal Affairs Dept.,International Monetary Fund. Monetary and Capital Markets Department
Publisher : International Monetary Fund
Page : 64 pages
File Size : 47,9 Mb
Release : 2013-10-06
Category : Business & Economics
ISBN : 9781498341714

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Key Aspects of Macroprudential Policy - Background Paper by International Monetary Fund. Fiscal Affairs Dept.,International Monetary Fund. Monetary and Capital Markets Department Pdf

The countercyclical capital buffer (CCB) was proposed by the Basel committee to increase the resilience of the banking sector to negative shocks. The interactions between banking sector losses and the real economy highlight the importance of building a capital buffer in periods when systemic risks are rising. Basel III introduces a framework for a time-varying capital buffer on top of the minimum capital requirement and another time-invariant buffer (the conservation buffer). The CCB aims to make banks more resilient against imbalances in credit markets and thereby enhance medium-term prospects of the economy—in good times when system-wide risks are growing, the regulators could impose the CCB which would help the banks to withstand losses in bad times.

Author : Nina Biljanovska,Sophia Chen,R. Gelos,Deniz Igan,Maria Martinez Peria,Erlend Nier,Fabian Valencia
Publisher : International Monetary Fund
Page : 52 pages
File Size : 40,8 Mb
Release : 2023-03-31
Category : Electronic
ISBN : 9798400226304

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Macroprudential Policy Effects by Nina Biljanovska,Sophia Chen,R. Gelos,Deniz Igan,Maria Martinez Peria,Erlend Nier,Fabian Valencia Pdf

The global financial crisis (GFC) underscored the need for additional policy tools to safeguard financial stability and ultimately macroeconomic stability. Systemic financial vulnerabilities had developed under a seemingly tranquil macroeconomic surface of low inflation and small output gaps. This challenged the precrisis view that achieving these traditional policy targets was a sufficient condition for macroeconomic stability. Thus, new tools had to be deployed to target specific financial vulnerabilities and to build buffers to cushion adverse aggregate shocks, while allowing traditional policy levers, including monetary and microprudential policies to focus on their traditional roles. Macroprudential policy measures emerged as the solution to this gap. Some of these measures had been used before the GFC (mostly in emerging markets). But it was only after the crisis that they were more widely adopted, and the toolkit expanded. This spurred a growing body of empirical research on the effects and potential shortfalls of these measures, with a further deepening of this knowledge gaining importance as policymakers confront increased financial stability risks in the post-pandemic world. Recognizing that there still is much to learn, this paper takes stock of our expanding understanding about the effects (and side effects) of macroprudential measures by focusing on these questions: What have we learned about the effects of macroprudential policy in containing the buildup of vulnerabilities? What do we know about the effects on economic activity and resilience? How do policy effects vary with conditions and over time? How important are leakages and circumvention? How do the effects on credit depend on other policies?

Author : Juliana Dutra Araujo,Manasa Patnam,Ms.Adina Popescu,Mr.Fabian Valencia,Weijia Yao
Publisher : International Monetary Fund
Page : 53 pages
File Size : 43,9 Mb
Release : 2020-05-22
Category : Business & Economics
ISBN : 9781513545400

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Effects of Macroprudential Policy: Evidence from Over 6,000 Estimates by Juliana Dutra Araujo,Manasa Patnam,Ms.Adina Popescu,Mr.Fabian Valencia,Weijia Yao Pdf

This paper builds a novel database on the effects of macroprudential policy drawing from 58 empirical studies, comprising over 6,000 results on a wide range of instruments and outcome variables. It encompasses information on statistical significance, standardized magnitudes, and other characteristics of the estimates. Using meta-analysis techniques, the paper estimates average effects to find i) statistically significant effects on credit, but with considerable heterogeneity across instruments; ii) weaker and more imprecise effects on house prices; iii) quantitatively stronger effects in emerging markets and among studies using micro-level data; and iii) statistically significant evidence of leakages and spillovers. Other findings include relatively stronger impacts for tightening than loosening actions and negative effects on economic activity in the near term.

Author : Behl, Abhishek,Nayak, Sushma
Publisher : IGI Global
Page : 377 pages
File Size : 44,5 Mb
Release : 2018-12-04
Category : Business & Economics
ISBN : 9781522572091

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Maintaining Financial Stability in Times of Risk and Uncertainty by Behl, Abhishek,Nayak, Sushma Pdf

Risks and uncertainties?market, financial, operational, social, humanitarian, environmental, and institutional?are the inherent realities of the modern world. Stock market crashes, demonetization of currency, and climate change constitute just a few examples that can adversely impact financial institutions across the globe. To mitigate these risks and avoid a financial crisis, a better understanding of how the economy responds to uncertainties is needed. Maintaining Financial Stability in Times of Risk and Uncertainty is an essential reference source that discusses how risks and uncertainties affect the financial stability and security of individuals and institutions, as well as probable solutions to mitigate risk and achieve financial resilience under uncertainty. Featuring research on topics such as financial fraud, insurance ombudsman, and Knightian uncertainty, this book is developed for researchers, academicians, policymakers, students, and scholars.

Author : International Monetary Fund. Monetary and Capital Markets Department
Publisher : International Monetary Fund
Page : 33 pages
File Size : 54,8 Mb
Release : 2011-03-14
Category : Business & Economics
ISBN : 9781498339179

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Macroprudential Policy - An Organizing Framework - Background Paper by International Monetary Fund. Monetary and Capital Markets Department Pdf

MCM conducted a survey in December 2010 to take stock of international experiences with financial stability and the evolving macroprudential policy framework. The survey was designed to seek information in three broad areas: the institutional setup for macroprudential policy, the analytical approach to systemic risk monitoring, and the macroprudential policy toolkit. The survey was sent to 63 countries and the European Central Bank (ECB), including all countries in the G-20 and those subject to mandatory Financial Sector Assessment Programs (FSAPs). The target list is designed to cover a broad range of jurisdictions in all regions, but more weight is given to economies that are systemically important (see Annex for details). The response rate is 80 percent. This note provides a summary of the survey’s main findings.

Author : Meghana Ayyagari,Thorsten Beck,Mr.Maria Soledad Martinez Peria
Publisher : International Monetary Fund
Page : 65 pages
File Size : 41,8 Mb
Release : 2018-12-07
Category : Business & Economics
ISBN : 9781484385654

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The Micro Impact of Macroprudential Policies: Firm-Level Evidence by Meghana Ayyagari,Thorsten Beck,Mr.Maria Soledad Martinez Peria Pdf

Combining balance sheet data on 900,000 firms from 48 countries with information on the adoption of macroprudential policies during 2003-2011, we find that these policies are associated with lower credit growth. These effects are especially significant for micro, small and medium enterprises (MSMEs) and young firms that, according to the literature, are more financially constrained and bank dependent. Among MSMEs and young firms, those with weaker balance sheets exhibit lower credit growth in conjunction with the adoption of macroprudential policies, suggesting that these policies can enhance financial stability. Finally, our results show that macroprudential policies have real effects, as they are associated with lower investment and sales growth.

Author : Zohair Alam,Mr.Adrian Alter,Jesse Eiseman,Mr.R. G Gelos,Mr.Heedon Kang,Mr.Machiko Narita,Erlend Nier,Naixi Wang
Publisher : International Monetary Fund
Page : 57 pages
File Size : 44,6 Mb
Release : 2019-03-22
Category : Business & Economics
ISBN : 9781498302708

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Digging Deeper--Evidence on the Effects of Macroprudential Policies from a New Database by Zohair Alam,Mr.Adrian Alter,Jesse Eiseman,Mr.R. G Gelos,Mr.Heedon Kang,Mr.Machiko Narita,Erlend Nier,Naixi Wang Pdf

This paper introduces a new comprehensive database of macroprudential policies, which combines information from various sources and covers 134 countries from January 1990 to December 2016. Using these data, we first confirm that loan-targeted instruments have a significant impact on household credit, and a milder, dampening effect on consumption. Next, we exploit novel numerical information on loan-to-value (LTV) limits using a propensity-score-based method to address endogeneity concerns. The results point to economically significant and nonlinear effects, with a declining impact for larger tightening measures. Moreover, the initial LTV level appears to matter; when LTV limits are already tight, the effects of additional tightening on credit is dampened while those on consumption are strengthened.

Author : Mohamed Belkhir,Mr.Sami Ben Naceur,Bertrand Candelon,Jean-Charles Wijnandts
Publisher : International Monetary Fund
Page : 54 pages
File Size : 53,7 Mb
Release : 2020-05-22
Category : Business & Economics
ISBN : 9781513536989

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Macroprudential Policies, Economic Growth, and Banking Crises by Mohamed Belkhir,Mr.Sami Ben Naceur,Bertrand Candelon,Jean-Charles Wijnandts Pdf

Using a sample that covers more than 100 countries over the 2000-2017 period, we assess the impact of macroprudential policies on financial stability. In particular, we examine whether the activation of macroprudential policies is conducive to a lower incidence of systemic banking crises. Our empirical setup is designed to account for the potential direct and indirect effects that macroprudential policies can have on banking crises. We find that while macro-prudential policies exert a direct stabilizing effect, they also have an indirect destabilizing effect, which works through the depressing of economic growth. A Generalized Impulse Response Function analysis of a dynamic system composed of the probability of a banking crisis and economic growth reveals, however, that macroprudential policies have a positive net effect on financial stability (lower likelihood of systemic banking crises).

Author : Janko Cizel,Jon Frost,Aerdt Houben,Peter Wierts
Publisher : International Monetary Fund
Page : 47 pages
File Size : 47,8 Mb
Release : 2016-04-26
Category : Business & Economics
ISBN : 9781484340578

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Effective Macroprudential Policy by Janko Cizel,Jon Frost,Aerdt Houben,Peter Wierts Pdf

Macroprudential policy is increasingly being implemented worldwide. Its effectiveness in influencing bank credit and its substitution effects beyond banking have been a key subject of discussion. Our empirical analysis confirms the expected effects of macroprudential policies on bank credit, both for advanced economies and emerging market economies. Yet we also find evidence of substitution effects towards nonbank credit, especially in advanced economies, reducing the policies’ effect on total credit. Quantity restrictions are particularly potent in constraining bank credit but also cause the strongest substitution effects. Policy implications indicate a need to extend macroprudential policy beyond banking, especially in advanced economies.

Author : Aleksandra Zdzienicka (Ms)
Publisher : Unknown
Page : 128 pages
File Size : 42,7 Mb
Release : 2015
Category : Electronic
ISBN : 1513518720

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Effects of Monetary and Macroprudential Policies on Financial Conditions by Aleksandra Zdzienicka (Ms) Pdf

Author : Ms.Aleksandra Zdzienicka,Ms.Sally Chen,Federico Diaz Kalan,Stefan Laseen,Katsiaryna Svirydzenka
Publisher : International Monetary Fund
Page : 29 pages
File Size : 49,5 Mb
Release : 2015-12-31
Category : Business & Economics
ISBN : 9781513519159

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Effects of Monetary and Macroprudential Policies on Financial Conditions by Ms.Aleksandra Zdzienicka,Ms.Sally Chen,Federico Diaz Kalan,Stefan Laseen,Katsiaryna Svirydzenka Pdf

The Global Financial Crisis has reopened discussions on the role of the monetary policy in preserving financial stability. Determining whether monetary policy affects financial variables domestically—especially compared to the effects of macroprudential policies— and across borders, is crucial in this context. This paper looks into these issues using U.S. exogenous monetary policy shocks and macroprudential policy measures. Estimates indicate that monetary policy shocks have significant and persistent effects on financial conditions and can attenuate long-term financial instability. In contrast, the impact of macroprudential policy measures is generally more immediate but shorter-lasting. Also, while an exogenous increase in U.S. monetary policy rates tends to reduce credit and house prices in other countries—with the effects varying with country-specific characteristics—an increase driven by improved U.S. economic conditions tends to have the opposite effect. Finally, we do not find evidence of cross-border spillover effects associated with U.S. macroprudential policies.

Author : Mr.Stijn Claessens
Publisher : International Monetary Fund
Page : 38 pages
File Size : 51,5 Mb
Release : 2014-12-11
Category : Business & Economics
ISBN : 9781484358115

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An Overview of Macroprudential Policy Tools by Mr.Stijn Claessens Pdf

Macroprudential policies – caps on loan to value ratios, limits on credit growth and other balance sheets restrictions, (countercyclical) capital and reserve requirements and surcharges, and Pigouvian levies – have become part of the policy paradigm in emerging markets and advanced countries alike. But knowledge is still limited on these tools. Macroprudential policies ought to be motivated by market failures and externalities, but these can be hard to identify. They can also interact with various other policies, such as monetary and microprudential, raising coordination issues. Some countries, especially emerging markets, have used these tools and analyses suggest that some can reduce procyclicality and crisis risks. Yet, much remains to be studied, including tools’ costs ? by adversely affecting resource allocations; how to best adapt tools to country circumstances; and preferred institutional designs, including how to address political economy risks. As such, policy makers should move carefully in adopting tools.

Author : Mr.Itai Agur,Ms.Maria Demertzis
Publisher : International Monetary Fund
Page : 23 pages
File Size : 40,9 Mb
Release : 2015-12-29
Category : Business & Economics
ISBN : 9781513545332

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Will Macroprudential Policy Counteract Monetary Policy’s Effects on Financial Stability? by Mr.Itai Agur,Ms.Maria Demertzis Pdf

How does monetary policy impact upon macroprudential regulation? This paper models monetary policy's transmission to bank risk taking, and its interaction with a regulator's optimization problem. The regulator uses its macroprudential tool, a leverage ratio, to maintain financial stability, while taking account of the impact on credit provision. A change in the monetary policy rate tilts the regulator's entire trade-off. We show that the regulator allows interest rate changes to partly "pass through" to bank soundness by not neutralizing the risk-taking channel of monetary policy. Thus, monetary policy affects financial stability, even in the presence of macroprudential regulation.

Author : International Monetary Fund. Monetary and Capital Markets Department
Publisher : International Monetary Fund
Page : 60 pages
File Size : 44,9 Mb
Release : 2011-03-14
Category : Business & Economics
ISBN : 9781498339162

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Macroprudential Policy - An Organizing Framework by International Monetary Fund. Monetary and Capital Markets Department Pdf

Macroprudential policy is a complement to microprudential policy and it interacts with other types of public policy that have an impact on systemic financial stability. Indeed, prudential regulation, as carried out in the past, also had some macroprudential aspects, and the recent crisis has reinforced this focus; hence, a clear separation between “micro” and “macro” prudential, if useful conceptually, is difficult to delineate in practice. Moreover, no matter how different policy mandates are structured, financial stability tends to be a common responsibility, reflecting the far reaching consequences of financial crises. This calls for coordination across policies, to ensure that systemic risk is comprehensively addressed. Equally important, macroprudential policy is no substitute for sound policies more broadly, including, in particular, strong prudential regulation and supervision, and sound macroeconomic policies. Operational independence in other policy areas, including monetary and microprudential policy, should not be undermined in the name of macroprudential policy. Finally, given the global nature of the financial system, the multilateral aspects of macroprudential policy will need to be fully considered—an important aspect that is only touched upon in this paper.

Author : Eugenio Cerutti,Stijn Claessens,Mr. Luc Laeven
Publisher : International Monetary Fund
Page : 43 pages
File Size : 41,5 Mb
Release : 2015-03-17
Category : Business & Economics
ISBN : 9781498316378

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The Use and Effectiveness of Macroprudential Policies: New Evidence by Eugenio Cerutti,Stijn Claessens,Mr. Luc Laeven Pdf

Using a recent IMF survey and expanding on previous studies, we document the use of macroprudential policies for 119 countries over the 2000-13 period, covering many instruments. Emerging economies use macroprudential policies most frequently, especially foreign exchange related ones, while advanced countries use borrower-based policies more. Usage is generally associated with lower growth in credit, notably in household credit. Effects are less in financially more developed and open economies, however, and usage comes with greater cross-border borrowing, suggesting some avoidance. And while macroprudential policies can help manage financial cycles, they work less well in busts.