Macroprudential Policies, Economic Growth, and Banking Crises

Author/Editor:

Mohamed Belkhir ; Sami Ben Naceur ; Bertrand Candelon ; Jean-Charles Wijnandts

Publication Date:

May 22, 2020

Electronic Access:

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

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).

Series:

Working Paper No. 20/65

Subject:

English

Publication Date:

May 22, 2020

ISBN/ISSN:

9781513536989/1018-5941

Stock No:

WPIEA2020065

Format:

Paper

Pages:

54

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