Effective Macroprudential Policy: Cross-Sector Substitution from Price and Quantity Measures
April 21, 2016
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Summary
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.
Subject: Bank credit, Banking, Credit, Financial institutions, Financial sector policy and analysis, Macroprudential policy, Macroprudential policy instruments, Money, Mutual funds
Keywords: Bank credit, Credit, credit flow, credit growth, Financial cycle, financial supervision, Global, investment funds, Macroprudential policy, Macroprudential policy instruments, macroprudential regulation, Mutual funds, nonbank credit, nonbank credit Flow, nonbank intermediation, shadow banking, WP
Pages:
47
Volume:
2016
DOI:
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Issue:
094
Series:
Working Paper No. 2016/094
Stock No:
WPIEA2016094
ISBN:
9781484337738
ISSN:
1018-5941
