How Effective are Macroprudential Policies? An Empirical Investigation

Ozge Akinci and Jane Olmstead-Rumsey

No 1136, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: In recent years, policymakers have generally relied on macroprudential policies to address financial stability concerns. However, our understanding of these policies and their efficacy is limited. In this paper, we construct a novel index of domestic macroprudential policies in 57 advanced and emerging economies covering the period from 2000:Q1 to 2013:Q4, with tightenings and easings recorded separately. The effectiveness of these policies in curbing bank credit growth and house price inflation is then assessed using a dynamic panel data model. The main findings of the paper are: (1) Macroprudential policies have been used far more actively after the global financial crisis in both advanced and emerging market economies. (2) These policies have primarily targeted the housing sector, especially in the advanced economies. (3) Macroprudential policies are usually changed in tandem with bank reserve requirements, capital flow management measures, and monetary policy. (4) Empirical analysis suggests that macroprudential tightening is associated with lower bank credit growth, housing credit growth, and house price inflation. (5) Targeted policies--for example, those specifically intended to limit the growth of housing credit--seem to be more effective. (6) In emerging economies, capital inflow restrictions targeting the banking sector are also associated with lower credit growth, although portfolio flow restrictions are not.

Keywords: Bank credit; house prices; macroprudential policy; dynamic panel data model (search for similar items in EconPapers)
JEL-codes: E32 F41 F44 G15 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2015-06-01
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (89)

Downloads: (external link)
http://www.federalreserve.gov/econresdata/ifdp/2015/files/ifdp1136.pdf Full text (application/pdf)
http://dx.doi.org/10.17016/IFDP.2015.1136 http://dx.doi.org/10.17016/IFDP.2015.1136 (application/pdf)

Related works:
Journal Article: How effective are macroprudential policies? An empirical investigation (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgif:1136

Access Statistics for this paper

More papers in International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.) Contact information at EDIRC.
Bibliographic data for series maintained by Ryan Wolfslayer ; Keisha Fournillier ().